Blood in video games has become a standard since Mortal Kombat (there was blood before but it was the first game to popularize it). Not only does blood give a sense of realism but also helps direct the players attention toward the action. The red blood stands out and it is easier to aim at and see exactly where your eneimes are. This is why blood isn't just added to a game it is also exagerated. Look at how blood draws your attention in these examples.
Just like how green is a good colour for the easier levels, red is a great colour for the harder levels. A lot of games have had lava or fire themed levels and they are usually the harder levels in the game and have a vibrant red colour scheme. However, red levels don't always need to use lava or fire.
Finally red can be used to just grab your attention without using blood. Some games have just used the colour red because it does a great job of standing out from most other colours.
So while green was the safe and clam colour, red is the danger and warning color. It can be used to either catch the players attention against everything else happening on the screen, or it can be used to warn the player of danger.