As described, it is caused by a parasite (turbellarian worm) that imbedes into the skin. Usually it affects only tangs. It does not spread rapidly and often does not seriously affect the health of the fish unless they become very heavily infested.
Recommended treatment is a 3 minute freshwater bath. In order to prepare a freshwater bath, use a clean bucket. Use tap water and add chlorine neutralizer. Get the temperature to within two degrees of the tank and get the pH as close as possible to the tank water with the addition of some buffer.
Repeat the bath every three days until the fish is clean. This can generally be accomplished in two or three treatments.
If you have to do this, it is also a good idea to have a QT tank setup so that you don't have to repeatedly chase and try to net the fish out of a display tank. This can stress the fish and cause other problems (like regular ick).
Fortunately I've never had to deal with it, but I know a few people who have.
You might also want to post this in the disease forum. Someone there may have an updated method to this that will cause you and the fish a little less stress.
