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.
Meaning[]
It means you've been caught doing something you weren't supposed to be doing. Tut-tut!
Use in Normal Speech[]
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!"