Over Hill Sailing Club
Probably just surface oxidation but if it looks like it's "peeling" in layers, it could be the sign of electrolytic corrosion, a more serious problem. That shaft log needs some serious cleaning up as do the flange bolts. If you ever need to adjust the packing or get the shaft disconnected to realign, etc., it will be a task. Better to do mechanical stuff like this ahead of time. Maybe replace the flange bolts and nuts and put some anti-seize on em when reinstalling.