Red chilli powder is made by drying and grinding whole red chillies. It is used in combination with other spices like garam masala, coriander powder, cumin powder etc. in most Indian curries. Just a pinch of the chilli powder gives the dish a tempting colour and a tasty, spicy flavour. The quantity to be added depends upon how hot the dish is required to be.
Also tastes good when sprinkled on salty French fries or mixed with salt and eaten with raw (unripe) mango slices!
Read more about red chilli powder here.