The red line shows you where the clipping plane is in the world space and the smaller red line indicates the normal of that plane. The normal indicates the side of the plane that the clipping will take place on. Meaning, if you execute a straight forward clip then anything in front of the plane will get clipped away.
Note that clipping will only happen to the brushes you have selected.
Clipping
Once you have your clipping plane in place, hit ENTER. You’ll get something like this: