I’m sure you guys have discovered that there is no limit to the crazy things you find in some homes! I agree with what Charley said. From what I can see in the picture, it should be functionally ok. However, I think we all agree that the design is poor. As evidenced by the rust stains at the base of the pipe, the exposure to the elements has already started to deteriorate the pipe. At the very least, a safe water deflection system should be installed to help keep the area dry. Best case scenario would be to have the homeowner consult a local chimney professional about retro-fitting the pipe installation correctly within the basement, as Charles had suggested.
Jae, to answer your question, Type B gas vent is for venting listed natural gas or liquid propane Category I appliances. The appliances listed below typically, but not always, use Type B gas vent systems:
• Furnaces • Water Heaters
• Boilers • Room Heaters
• Decorative Gas Appliances
• Floor Furnaces • Unit Heaters
Have a great day guys! -Tom