That is the chemical reacting with embedded iron, mostly brake dust. The colour is the reaction, not a measure of the damage. Rinse it off before it dries and keep it out of direct sun.

If you want the wheel actually clean, yes. Most of the brake dust sits on the inner barrel where a mitt cannot reach, and a wheel that looks clean from the front while the inside is still black is the most common thing we see. A long soft barrel brush plus a smaller one for the face covers nearly every wheel.