actually the tail cut IS a joint in the tail's design... I seem to recall it in a documentary it coming apart or something, and getting "touched up" as a wound of sorts.
I think there's no story going with it, but I like the thoughts that it's a scar from his younger days, or something like that. Like Capone's or Luccianno's on their face and whatnot. Just part of the job.
Jabba's one of those guys that, when you see him in other things (Clone Wars 2008, EU, etc.) you almost sort of think he's got a cool background and maybe isn't 100% a ******bag like he is in ROTJ... Much like Boba I guess, or Jango. Douchebags in the movies, but their EU and backstory makes them much less black/white as characters.
Hell, Bounty Hunter made you almost root for Jango in the Arena then.