The "Reds" are the Soviet communists who controlled Russia at that time. Red is a color associated with both communism in general and the Soviet Union, as it was the color of the Soviet flag.
The few boys—Ralph, Piggy, Sam, and Eric—who have not joined Jack's group or been killed are trying to get the fire going despite the rain and damp. They need a big fire with lots of smoke if they are to have any chance of attracting a passing ship or plane. They also need the fire for comfort and warmth at night.
When Ralph makes the comment about the Reds, he is showing signs of hopelessness: the implication is, what difference if we have smoke or not, because we might just as well get captured by the enemy communists. However, as Eric points out, even that would be better than falling into the hands of Jack's murderous, barbarous group.
Despite all their efforts, the four boys have to give up on the fire for the night. This is a low point in the novel. The fire is the symbol of civilization. The four remaining civilized boys's inability to keep it going indicates that they are falling away from civilization, reverting back to a more primal state.