Chillies aren't just about adding heat to a dish as each variety offers a different flavour from smoky to nutty or fruity. Many cuisines use specific varieties for different purposes, whether its fresh large fleshy ones to stuff with or dried ones for crumbling into sauces and stews.
Buy fresh ones that look crisp and glossy and not wrinkled. Generally, the fatter they are the milder the taste. The tiny green bird chilli and Thai red chilli are both high on the heat scale (though the little round and wrinkled Scotch bonnet is even hotter), the deep red Kashmiri chilli is a bit milder and it offers deep colour without extreme heat, whereas the yellow-green European banana chilli is both plump and very mild.
Red and green chillies vary in flavour, but although red ones are ripe green chillies, colour does not determine heat. If you are unsure of the variety and its heat, add cautiously.
Dried chillies tend to have a more concentrated flavour and can get hotter as they reconstitute during cooking, so add them at the beginning of cooking for lots of heat, or at the end for a milder effect. To remove the seeds from dried chillies, remove the stem end then shake them out. Use dried chillies whole, crushed, flaked or powdered. They will keep for about a year in an airtight container.