It's OK, it doesn't mean you've been caught doing handprints with red paint. Unless you weren't supposed to be playing with red paint.
It means you've been caught doing something you weren't supposed to be doing. Tut-tut!
Use in Normal SpeechEdit
After being caught.
"Mandy's had it in for me ever since she caught me red-handed reading her diary."
After catching someone out.
"Ha! Caught you red-handed! You should not be reading my diary!"