Holding the leg like this is indicative of one of 2 problems: either a sudden luxated patella or a torn cruciate ligament.
Luxated patellas are more common in small breeds (though do occur at times in larger dogs). If not familiar, this is when the knee joint (called the patella) slips out of its position, causing the leg not to move like the hinge it is supposed to. It can be somewhat painful, or may not show any signs of pain at all; but generally dog's hold their leg in a way so they feel no pain from it- thus the lifted "relaxed" look to the leg. Depending on the severity of the luxation, it can sometimes be pushed back into its socket and the dog given an anti-inflammatory, or if severe, requires surgery to cure. Sometimes, with those that start to slip out on a regular basis, the vet can show you how to slip the patella back into place.
Another possibility is the torn (either fully or partially) cruciate ligament. This is more common in large breeds who are active or overweight, but yes, can occur in smaller breeds. This is when the dog moves in such a fashion that the bottom part of the leg (under the knee) didn't keep up for that split second with the upper part of the leg when turning, and the ligament itself tears. The way you describe your dog holding his leg is classic for how a dog with a torn ligament holds its leg. It is generally diagnosed on physical exam and again treatment depends on the severity of the tear. Some people opt for anti-inflammatory meds for 2 weeks to see if there is improvement. It cannot be cured this way, and lends itself to the possibility of tearing further this way, but some people opt for it if their dog is older or if overweight, as they may not recover as nicely until they take weight off. The only way to fix the ligament itself is with surgery, with 3 different types of surgical procedures in common practice today for this problem- it is a very common problem, indeed. I work with a surgeon who does about 8 cruciate surgeries a week, mostly larger dogs like labs, shepherds, etc, but the occasional poodle, shih-tzu, etc...
Keep your dog calmer and avoid running/jumping, etc until you can get to a vet.
Let me know if I can help further, and hope the recovery goes well! Best of luck,