Hi,
When plugins indicate Red in the output level, what exactly does it mean? I never hear anything clipping, and the indicators in Sonar is not red. A little guidance would be appreciated :-)

 
Example:

 
BR

It basically means the output has exceeded "recommended" level.
While it still may not show clipping on the channel, this could be due 
to the trim being low, the channel fader volume being pulled down, or
several other scenarios.  "Balance" it out by setting the fader to 0db,
and then check to see where it indicates on the meter, then back the output
on the effect off until you are no longer "in the red".  You want peaks on the channel meter
to remain about -6 db, to allow headroom for summing and Mastering later in the process.
All part of the gain staging process before beginning to mix...

cclarry
It basically means the output has exceeded "recommended" level.
While it still may not show clipping on the channel, this could be due 
to the trim being low, the channel fader volume being pulled down, or
several other scenarios.  "Balance" it out by setting the fader to 0db,
and then check to see where it indicates on the meter, then back the output
on the effect off until you are no longer "in the red".  You want peaks on the channel meter
to remain about -6 db, to allow headroom for summing and Mastering later in the process.
All part of the gain staging process before beginning to mix...

Thanks! Very helpful.

Grand Maester Larry !

Technically, you can't "clip" in the floating-point realm. As long as you stay below 0dB at the master, clipping is not a concern.
 
However, some plugins do not handle positive dBs well, and you can suffer from cumulative distortion even though floating-point numbers don't clip.
 
If nothing else, going into the red on individual plugins means more attenuation will be required from your master limiter, giving it less room to maneuver and make intelligent decisions during that process. So it's a good idea to stay out of the red all the way through the signal chain.