This is the 4974th most frequent Russian word.
красным
"Красным" means "red" (in instrumental or dative case, singular, masculine/neuter).
Here, 'красным' is instrumental in describing the means or medium (red color) used to paint the house.
Мы нарисовали дом красным цветом.
We painted the house red.
Here, 'красным' indicates the color used to highlight the text, again functioning as an instrumental specification.
Этот текст выделен красным цветом в документе.
This text is highlighted in red in the document.
In this sentence, 'красным' is used to indicate the color of the print, functioning as an adverbial specification.