What happens in a stall during a slip?
In order for a spin to develop, you need two things from the airplane:  


it must be stalled
it must be yawing.  


Since the airplane is not yawing while in a slip (it is actually flying straight ahead, although uncoordinated), the airplane simply won't spin.  Instead, when the stall occurs the higher wing (which has the higher angle of attack) will stall first, the wing will drop, and the wings will tend level.  

That being said, it is still a stall and can be dangerous at low altitudes.  It can also turn into a spin if you leave the rudder applied as the wings level and you come out of the slip (and into a skid).

The best protection for all of this is to watch your airspeed and angle of attack to make sure that you always have sufficient airspeed so that you never stall in the first place.

Additional Information

Since this has generated some debate, here is additional information:

Spin

According to Wikipedia (emphasis added by me):


  Spins can be entered intentionally or unintentionally, from any flight
  attitude and from practically any airspeed—all that is required is
  sufficient yaw rate while an aircraft is stalled.


Yaw

So this brings us to Yaw - Wikipedia:


  The yaw axis is defined to be perpendicular to the body of the wings
  with its origin at the center of gravity and directed towards the
  bottom of the aircraft. A yaw motion is a movement of the nose of the
  aircraft from side to side.


Skid

Skid - Wikipedia actually covers this exact scenario:


  The skid is more dangerous than the slip if the airplane is close to a
  stall. In the slip, the raised wing — the left one if the airplane is
  turning to the right — will stall before the lowered one, and the
  airplane will reduce the bank angle, which prevents the stall. In the
  skid, the lowered wing will stall before the raised one, and the
  airplane will tighten the turn, and the stall can develop to a spin.


Slip

Slip - Wikipedia says:


  A slip is an aerodynamic state where an aircraft is moving somewhat
  sideways as well as forward relative to the oncoming airflow or
  relative wind. In other words, for a conventional aircraft, the nose
  will be pointing in the opposite direction to the bank of the wing(s).
  The aircraft is not in coordinated flight and therefore is flying
  inefficiently.


Note that the aircraft is moving sideways.  The nose of the aircraft is not moving, and it is therefore not yawing.  It also says:


  Often, if an airplane in a slip is made to stall, it displays very
  little of the yawing tendency that causes a skidding stall to develop
  into a spin. A stalling airplane in a slip may do little more than
  tend to roll into a wings level attitude. In fact, in some airplanes
  stall characteristics may even be improved.