Connections are the access mechanisms to the different information stores throughout the organization.
They define the information necessary to get to each set of data whether as a source or even as your main target.
RED is context sensitive in that once the connection is defined, what you can do with it is governed by how it is defined. i.e the options for a Database connection are quite different to that of a Text file connection. In this way you are guided to ensure that you handle these connections appropriately.