These coins are made of nickel-plated-steel - meaning that the surface is very resistant to rust and corrosion, but the core rusts easily once it is exposed.
What has happened with this coin is that it has sat underwater for a long period of time - at least several months, possibly several years. The water has found pinhole-sized gaps in the plating at its weakest point - the edge - and caused the core of the coin to begin rusting. Or perhaps someone has dropped it into a bottle of coca-cola or something similar - it can cause a similar reaction, only much faster.
Either way, it is a damaged coin, and not an error or variety. Sorry.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
Thanks a lot Sap !! very wise and useful explanation.I will put the coin in an special section of my collection called curious but not valuable coins .
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