A red dot finder is a piece of glass that reflects an illuminated dot back to your eye, so the dot appears to float on the sky. It magnifies nothing and gathers nothing, and it is the most useful two ounces on many telescopes.
Why no magnification is the point
Finding something starts with knowing roughly where it is, and that is a naked eye task. A magnified finder shows a small piece of sky and inverts it, which makes matching what you see to what you know surprisingly hard. A red dot keeps the whole sky in view and lets you point the telescope the way you would point a finger.
Where it stops working
It shows only what your eyes can see. For the moon, the planets and the bright clusters that is everything you need. For a faint galaxy it is no help at all, and you either star hop with a magnified finder or use a computerised mount to get there.
Battery, brightness and the small annoyances
They run on watch batteries that die in the cold and are easy to leave switched on. Keep a spare in the case. Turn the brightness down as far as the dot remains visible, because a bright dot ruins your dark adaptation and hides the faint stars you were trying to point at.
Fitting and alignment
Most fit a standard shoe on the tube, so swapping one between instruments is easy. Align it in daylight against a distant object, exactly as you would an optical finder, and re-check after transport, because the shoe is the part most likely to be knocked.
Questions people ask about telescope
What is a red dot finder?
An unmagnified sight that projects a red dot onto a window, so the dot appears against the sky where the telescope is pointing.
Is a red dot finder better than a finderscope?
Faster and more intuitive on anything the naked eye can see; useless on fainter targets. Many observers fit both and use each for its own job.
Why is my red dot finder not lining up?
Almost always the mounting shoe rather than the sight. Re-align against a distant daylight object and check that the shoe is tight.