In wood talk, those are pubes.
That is very natural and it's not harmful at all, the fish will eat them. My tank has a driftwood that's been there for six months and I only saw it at the beginning(first 2 weeks to a month), but right after I added fish in it "vanished." I just redid my tank while fish were absent and the fungus started to grow again.
If you look closely, it's still present on my driftwood right now... but the fish will eat it... soon... I hope...
http://www.monsterfishkeepers.com/forums/showthread.php?432419-Gold-Saum/page4&highlight=