The condition of scaly leg is the result of parasitic mites, known as Cnemidocoptes Mutans, living on a chicken's legs and feet. This mite likes to burrow underneath the natural scales of the leg to thrive in the moist environment. Some other mites live on a chicken's body and can be serious, whereas scaly leg is not fatal. It can however be extremely uncomfortable and irritating, sometimes causing egg laying to stop and perhaps causing permanent leg deformities.
You can easily notice that your chicken is suffering from the mite infestation due to the raised appearance of the scales on the legs. They will look thicker than normal and and seem lumpy, sometimes looking like white growths. The mite itself is so small that you will be unlikely to see it.
Yes this condition is highly contagious to other chickens, particularly to those who are older and who have lots of feathers on their legs. It seems to spread more easily when chickens are kept on bare earth, on damp ground or spend their time in dry chicken runs.
Scaly leg is not fatal, but it can make your chicken very uncomfortable and irritable. If not treated it can lead to leg deformities, which in turn may prompt an owner to euthanise the chicken out of kindness.
If left untreated scaly leg can become very serious, potentially causing lameness and leaving your bird unable to perch. It is relatively easy to treat, with sprays such as scaly skin remover that are applied directly to the area. Such sprays are made with active ingredients that will leave behind a natural oil that can help to protect against further infections. Applying petroleum jelly is very effective at eliminating the mites, although this must be done repeatedly in order for it to work. This will eventually cause the encrustations to soften and the jelly will then suffocate any mites.
You should be treating your chickens living areas in order to prevent re-infection. It is advisable to use a specific poultry house disinfectant, in the form of a spray or a powder on a regular basis to ensure that the mites are kept at bay. If your chickens live on damp ground, consider covering the area with a woodchip of similar material that can help to keep the legs and feet dry.
Generally these mites do not live on humans, although they can bite us and leave irritation behind.