That's a vertical shaft motor - the blade is run directly from the motor shaft, which sticks through the deck.
Clean it up and figure out where the oil is coming from. The only likely place on the side of the motor would be the air intake (which has a crankcase vent tube feeding it, usually).
Check/change the oil - overfull can certainly cause foaming and puking oil overboard.
But those engines are pretty much disposable - if it's a rings issue, it's probably also a bearing issue, and it's toast.
That said, if it runs for a while, feel free to use it. I've got an old string trimmer with a worn out motor that goes through oil and the rings are bad enough that if I tip it to work on the string bits, it'll smoke for a while on startup. Meh. It runs. I'll replace the motor eventually.
