Noise coming from inside rear hub
 

Yesterday, I noticed for the first time a noise coming from the rear hub. When it first started (fairly abruptly), it sounded just like an out of true rim scrubbing on the brake once per revolution but with a gritty component to the sound. I put the bike on the car rack and found that the noise only happens in freewheel and goes away when there is drive pressure on the hub. The noise is loud enough to sometimes be heard over wind noise at 15-20 mph, especially with a little tail wind and seems to get worse with speed. There is definitely a coarse and gritty feel to the sound though it has to be on the rack to pick that up.

The owner and main mechanic at my LBS will be gone till next Monday and I tend to ride every day. First noticed it yesterday and rode today without noticeable change.

Shimano BTW

Is this something I need to stay off the bike for until repair?

Hm, could be quite a few different things. My first instinct would be to check the spoke protector (aka pie plate), the plastic piece on the backside of the freewheel. These things are notorious for making horrendous noises. If thats what it is, I would just take it off and forget about it - as long as the derailleur is adjusted properly you don't need to worry about the chain getting thrown off the backside of the freewheel.

If thats not it, it is probably something within the freewheel or cassette body (depending on what kind of hub you have). The reason I suspect this is because you only hear the noise when the freewheeling mechanism is engaged (i.e. no drive pressure on the hub). If this is the case, its probably that you'll need to replace it.

I personally wouldn't suggest continuing to ride on it, if there is a problem within the pawls or the bearings it could produce more damage, like if the freewheel freezes causing damage to the chain and derailleur, and maybe worse. If its not the spoke protector, get it checked out.

How old and how many miles on the bike?

It's 5 months and close to 3500 miles.

Given the sudden onset and the more important fact that it only occurs when coasting, I'd bet that it's probably dirt in the freewheel/hub seal area. When pedaling they move together so no noise. - when coasting there's relative movement and noise. You'll want to have it serviced sooner rather than later, but I wouldn't be afraid ti ride it in the meantime.

BTW- if you have a cassette lockring tool, take off the cassette and see if it's simply a bit of string or other debris wound around the hub behind the cassette. This is common and easily remedied at home.