There was some knob and tube wiring that had not been updated over the years. This is an extreme example of a dangerous situation. Yes that is an un-insulated conductor over a steel heating pipe. The good news is that the city water supply is bonded to earth and the neutral so that in the event the pipe becomes energized it would cause a dead short and pop the breaker instead of creating a possible deadly situation where the plumbing is electrically hot.
Here is piece of BX (metal jacketed wire) that has become energized as a result of being part of a knob and tube circuit that has no ground. The arc in the picture is grounding to a gas line. I am not sure that is gets any worse than this.
