During the rusting of an iron nail, iron and oxygen combine to form iron oxide. This process typically involves the presence of water or moisture, which acts as an electrolyte, facilitating the electrochemical reactions. The overall reaction can be summarized as follows:
\[ \text{4Fe} + \text{3O}_2 + \text{6H}_2\text{O} \rightarrow \text{4Fe(OH)}_3 \]
Iron(III) hydroxide (Fe(OH)₃) can further dehydrate to form iron(III) oxide (rust), which is usually represented as Fe₂O₃·nH₂O, indicating that rust is a hydrated form of iron oxide.
So, the correct answer for what happens during rusting is: iron and oxygen combine to form iron oxide.