Black Steel pan help
Had you *used* this pan before, or were you scouring the virgin pan with steel wool?
These pans are claimed to be specially heat-treated to prevent rust. My guess is that it is a heat+chemical process akin to bluing or Parkerization. Your scouring probably took all or part of that thin layer off, and that's what you saw and smelled. But I do not think you did it any harm.
<The pan started leeching this brown iron smelling stuff>
It is rust.
<I have no idea what to do. >
Remove the rust.
<Did I do something wrong?>
It depends what you want to do. There is nothing particularly wrong to create rust while cleaning the pan. You just won't want to season a rusty pan. Make sure you remove the rust before seasoning.
<It is a brand new pan. It is already rusting?>
You use water, right? Water combines with steel can induce rust -- new pan or not.
Like GH said, it is either the steel wool rusting or the pan is rusting. Not a big deal. There are several things you can do. You can keep doing what you do by scrubbing the pan including the rust, then wipe it dry really fast with papertowel. Alternatively, you can scrub with salt and cooking oil along with a papertowel or whatnot. The salt will act as abrasive in removing the rust. The oil will prevent rust.