It's real. The ink just didn't hold up to circulation well.
The serial numbers and seals are printed with ink that is, for lack of a better term, "in" the paper and that's why they don't wear away due to circulation.
The black and green ink that make up the rest of the design are printed in intaglio. This means that the printing plates are *engraved* with the design that we see on the notes. When the notes are printed, the portions of the bills that have ink are actually pressed *into* the plate and pick up the ink (after the plate is inked and wiped; ink stays in the engraved portion). This is why you can feel Washington's jacket if you rub your fingernail on it on the reverse side of the note.
Long story short, that ink is "on" the paper instead of "in" it which is why the border designs and portrait wear away quite easily compared to the serial and seals.