I've been intrigued by this boolean in CombatLib, where a weapon can be rusted.

This is presented in the 'Combat' tab of a weapon object under the check box, 'Weapon can be rusted?'

I can't find anything in the library's documentation though that explains what this feature actually does.

For example, does checking this box do any of the following?
-Increases the chance of the weapon randomly being a 'rusted' weapon upon starting the game
-Mean the weapon is less effective if/when it becomes rusted
-Makes the weapon rusted through some action or overuse
-Allows for the possibility for the weapon to become rusted somehow

I'm uncertain, but would like to know what the 'weapon can be rusted' feature actually does, and how to activate it in-game.

Searching through the code, it seems the only place in the file it's mentioned is in the editor.

So… it doesn't do anything at present. It's presumably set there so it can be used by some other script in the future; whether that's another library that uses it, or so that you can use it if you add some kind of rust spell.