When pressing the red button on applications why doesn't it actually close it down?
That is intentional. Why close the app just because you've closed the last document? What if you wanted to create a new document? If your intent is to quit the application, choose Quit from the application menu (the one with the application's name, right next to the Apple menu), or press command-Q.
The inconsistency macjack is referring to is that certain apps quit when you close the window. Those apps are typically apps that have only one window and no purpose without that window open. If you train yourself to quit the right way, you'll rarely even notice that inconsistency.