It's about shot! I'd put the rod back in the heater, but definitely get a new one for next camping season! Once it gets down to just the center core, they are completely dead. But you've got the winter to get a new one now. Won't hurt anything to put it back in, even use it a bit longer, but definitely get a new one to replace VERY soon.
Edit:
You don't clean them. The stuff you see is dissolving. It's suppose to do that.
This is what a new one looks like. As it deteriorates (actually protecting your heater), it eventually looks like your. Do not clean off that crusty stuff. That's still good.
one more Edit:
If you don't have a replacement yet, you need to put this one back in so the threads will not rust out on your water heater. You can see how bad the rust got on the threads on the rod and where they are still good where they were threaded into the tank. You want to keep it in to keep the tank from rusting or else you'll never get another rod back in.