Any idea what causes this and is it normal. A little oil weeping I get. But the indications of rubbing are strange. This is just past the transfer case connecting to drive shaft. There is nothing there that could be causing the rubbing, but it r really looks like something has rubbed about 1\4 inch past the rubber gasket

 

Looks like normal play from the shaft moving in the slip joint as the chassis and suspension flexes.

 

Cool. I didn't know that was a slip joint. Learn something every day.

 

Yeah, I found out the hard way when I was flipping around my rear blocks that the shop installed backwards.

 

As the suspension is compressed the driveshaft(s) become more inline with the transfer case or transmission, thus there's a shorter distance between the output shafts and the differential. Since the drive shafts aren't variable in length, the yokes on the driveshafts are designed to slip in and out of the output shafts of the transfer case and transmission. The common term here is "slip yoke". This your seeing the result of the "slip" portion of the yoke.