An insulting name you can call someone when you don't want to be too mean but when you want to make sure they know that you think they're an idiot. many people may ask why you would use the Muppets good name in such a way, but seeing as there are good and bad Muppets their arguments are invalid.
now you know this definition so you can avoid looking like an Uncultured Muppet in future conversations
A person(s) who mis-reads a question(s) on the internet and embarrasingly requests the definition, and - or, a person who replies wrongly to said question.
Person A: What do you mean I wish it was talk another time?
Person A: You wish we could talk another time?
Person A: Ooooh, I'm a Red Muppet. You meant, you wish it was okay and we'll talk another time.
The term Red Muppet derives from the original term "Muppet", the term "Red" has been applied so that it conveys someone is embarrased and also a "Muppet".