It appears to be brake fluid all over my rear passenger wheel. What would cause this or could it possibly be another kind of fluid?

The brake wheel cylinder (or caliper piston, year model?) seal is leaking, easy fix.
It could also be the axle seal but more likely the brake--check the master cylinder fluid level.

97 grand cherokee laredo 4x2-- it is also making a noise from that side--when you turn it clicks and clanks

you have a rear wheel cylinder leaking had same on mine cost about $ 15complete cylinder spray brake line and cylinder bolts good with PB blaster solvent. i use anti- sieze when putting brake line back on jeepman600@yahoo.com Dale

can't be a wheel cylinder, there are no wheel cylinders on 97 (disc brakes all around), 93 and some 94 had drum brakes in the back, but 95 and later were all equipped with disc all the way around.

Have someone pump the brakes (with the jeep running) while you look for the leak.

How about an axle seal?

it could be gear lube, if the axle seal is bad like XJ said.

Smell it, gear lube has a nasty smell to it.

Repair shop said the rear axle is bad. How much should this cost?