What is it?
 

Bit of a nube here but was wondering the stuff is around the ESC wires an the motor wires that I see people putting on an what does it do?

heat shrink tube?

http://en.wikipedia.org/wiki/Heat-shrink_tubing

stops bare wires touching (and making a big mess).
Also covers up my woeful soldering jobs

Sorry not the heat shrink, it looks like putty or something

If it is happening in the wet, I would suspect you mean good old fashioned blutack. Alot of drivers use this as a way to keep water out of the electronics

I see, take it it works then

It could be Lazy Goo that you ave seen, it's sold by RCLazy in Bournemouth. We use to help waterproof the ESC and motor. You can find it here http://rclazy.com/shop/lazy-things/lazy-goo/