Rust
Chris -- The rust will have no effect on the ABS sensor - just looks rather unsightly !
However , do not be tempted to powder coat the thing as it needs to retain it's magnetic properties in order to fully function .
If the rust is bothering you a new ring will set you back less than £30 , or you might just be lucky and source a rust free jobbie from a breakers (Motobins ?) . Or , you might try cleaning off the surface rust with a brass brush (as used to clean suede shoes !) and give the cleaned surface a coat of spray on silver anti-rust paint or even primer . Fiddly but cheap and it might do the trick .
Best of luck ,
Jim .