1) The red line is called the timeline scrubber. It defines where you are in a particular clip or in the entire project. The timecode under the preview window follows this red line and reports the exact location of this scrubber, HH:MM:SS:FF, hours, minutes, seconds, frames.
2) Nothing really. That scrubber can only be located at frames for video. Simply move it to a location, use the split feature to cut the video there, move to new location and split again. Now one has a small video segment that you can delete.
3) Yes it does. When you use the delete on that small segment you split out, you will be presented with a few options on what you want to do with the timeline content. If you "Remove and Leave Gap", you will just have a black section in this area. In such case the last frame from the split will go to a black frame and the black frame at the end of the split area will go to the first frame at the end of the split. If you "Remove and Fill Gap", the two ends of what you split will simply play one after the other.
If it's a static picture on the timeline vs a video, the split just changes the duration of that pic, but again it is split at a frame level.
Jeff