It's the cartridge seal. If you've never done one before, it can be easy to screw it up. I'd suggest taking it to a pro.
I am no expert suspension guru and was able to do it. The first fork I drilled the pings out and then someone sugested I make a tool. So, I made the tool (cost me about 30)and tried it on the second fork and it was much better method. I will post the link below and it should awnser most of your questions. Beware though, if you mess up it will cost you a new cartrige (185).
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