After reading all the comments I have to offer this.
I have a Atwood model 10-E water heater. It's gas/electric.
My literature on the heater calls the red light a lockout condition and will light red when a lockout occurs. There are a number of conditions that will trigger the red light to come on. When the light comes on there is a problem in the heater and the literature explains what to do to turn it off.
So, I guess other heaters work different so all I can say is read your literature on your heater to see the proper way it should work. Who knew.
Hal