Can someone tell me what is happening here?

OK, so I had my car up on the lift and I was just checking things over when i noticed a drop of oil at the bottom of the rear brake drum plate on my 65 Cuda.

I pulled the wheel and hub and found this behind the axle flange!! Any thoughts on what is happening?
I'm sure I would have noticed this when i did brakes a year or so ago. How could this be getting chewed up like this?

BTW, it's an 8.75 rear if it matters.
The 2nd pic is the other side and is fine.