Removable rust, otherwise looks like a good starting point from here?
When you go to reassemble that brake caliper, install new rubber seal(s) on the piston in that caliper. They may be damaged from crud and are surely hard from age. The way the caliper retracts the puck is: when the brake is applied the puck slightly edges outward to make disc contact, and when released the rubber seals around that piston will pull the piston back when you release the brake lever. This is about 0.002" travel, typically: when the rubber is real old it no longer grips onto the puck so it slips out, and then it won't retract it, either. Then the pad drags, and squeaks.
And then, new rubber seals make it retract better again. It ain't much movement, but it's important!