The Red Flag

The red flag is SERIOUS. It is not used to communicate advice or help, it is an INSTRUCTION.

The red flag is an instruction from the Clerk of the Course that with immediate effect the session (race or practice) has been halted.

The reasons for this are many, usually a session will be stopped because of an incident that cannot be dealt with whilst cars are circulating. It can be used because a car has stopped in a dangerous position and cannot be moved safely, it could be that weather conditions have deteriorated to such an extent that to continue would be very hazardous.

Many of the rules that appear in the Blue Book with reference to flag communication are not in my view written particularly well, however, in this instance they have got it spot on.

Competitors Will Be Warned That the Race Has Been Stopped by the
Simultaneous Waving of the Red Flag at All Flag Marshaling Posts.

Immediately Cease Driving at Racing Speed and Proceed Slowly, Without Overtaking, and With Maximum Caution to Pits or Startline
Obeying Marshal's Instructions, and Being Prepared to Stop Should the Track Be Blocked.

That's it. The clearest rule in the book. That is exactly what you should do.

 As mentioned elsewhere recognition of the flag is very useful, a raised arm will show the marshals that you have seen the signal and will also alert following drivers to take the appropriate action. One small tip is not to slam on the brakes instantly, as this can cause an accident involving the following cars.

Continuing to race or try and qualify after the red flag is very dangerous and absolutely pointless as the clocks are stopped when the red is called for, in the case of a race the result or part two grid will be declared from the previous lap.

The consequence of racing/overtaking after a red will result in an intensive interview with the Clerk of the Course, something he doesn't enjoy and you will sadly remember for a long time!