Ahem...
Belly button fluff consists primarily of stray fibres from one's clothing, mixed with some dead skin cells and strands of body hair. The rotting cells can create unpleasant odours.
Contrary to expectations, belly button fluff appears to migrate upwards from underwear rather than downwards from shirts or tops. The migration process is the result of the frictional drag of body hair on underwear, which drags stray fibres up into the belly button.
Women experience less belly button fluff because of their finer and shorter body hairs. Conversely, older men experience it more because of their coarser and more numerous hairs.
Belly button fluff's characteristic blue-grey tint is likely the averaging of the colours of fibres present in clothing; the same colour as clothes dryer fluff.