CityWorld,

I agree with Goji, that he's likely just talking to you about something he's thought about and he realizes that it arouses him. It would be good to talk more with him to understand where the desires have come from and how he feels about them. I personally have many desires and fantasies that get me really aroused and erect, but I wouldn't necessarily tell others about them or act upon them.
The thing your boyfriend needs is your compassionate ear, without any judgement. If he needs help dealing with the feelings, then help him. I don't mean that you have to encourage him to explore, but all relationships need to be built on truth and honesty. If he is discouraged or hesitant to confide in you, then he will be more likely to hide things from you in the future.