It does look like mud in the pic, but it looks like rust in real life. I didn't notice any excessive grit, moisture, dirt, mud, etc. I can't say that I've ever had the rotor off that side before. I know I should have been greasing the bearings every year, but I suck okay. What can I say? Just recently I started hearing a growling sound and knew it was more than my tires. I knew I had a ball joint going bad too, so I jacked up that wheel and tried to lift the tire like you would if you wanted to test for a bad ball joint. The wheel moved all over the place (back and forth, not up and down) and I realized that the spindle nuts had come loose again. I took the locking hub out and tightened the nuts, setting the preload on the inner one like you're supposed to. It seemed that the outer one was super tight like it needs to be, but the inner one was a little loose. After they were tight, I shook the tire again and saw that the lower ball joint was indeed shot. I took the rotor/hub off to get the axle shaft out so I could get to the ball joint and that's when I found this nice surprise.