
So after doing some searching on the internet, I came across this thread http://forums.vwvortex.com/showthread.php?2526976.
Apparently, it's a mixture of oil fumes and water vapor...
and the solution they list out are:
Thought it might be useful for others to know because it scared the crap out of me when I first saw it. I thought it was a blown head gasket or something..1. Replace both oil gaskets in the oil breather. One sits between the oil breather and the valve cover. The second gasket you must replace is the one on the oil cap. When these gaskets get heated, the rubber/silicone often burns and shrinks thus allowing for moist air to enter and interact with oil fumes
2. Avoid short trips. This is primary leading cause for this sludge. Long trips will allow the engine to stay hot for longer, thus burning off any excess fumes and sludge.
3. Switch to synthetic oil. Synthetics have better detergent qualities and will not sludge as much as the conventional motor oil
