1. To become thoroughly corroded by rust, especially as to cause something to be full of holes or no longer work correctly. I went to go put the pile of leaves and branches into the wheelbarrow, but the whole damn thing was rusted out! You see here? The engine block is totally rusted out, meaning we'll have the replace the whole thing.

2. To cause something to become thoroughly eaten through by rust. In this usage, a noun or pronoun can be used between "rust" and "out." Saltwater has rusted the hull out completely—the boat won't be seaworthy until you fix it. Because this part of the machine wasn't sealed correctly, moisture got in and rusted out the electronics.