There is a red phone icon at top of display where notifications dot usually is. What does this mean?

Hi

If your watch does not reconnect to your iPhone automatically after they are brought close together:

• Check that both Bluetooth and Wi-Fi are enabled on your iPhone (it may help to toggle Bluetooth off and on again).
• Check that you have not enabled Airplane Mode on your watch:

  When viewing the time, swipe up on the watch face > swipe sideways to the Settings Glance > if Airplane Mode is turned on, tap the button to turn it off.

• Restart both devices, turning both off together, then restarting your iPhone first:
  • To turn your watch off: press and hold the side button, then drag the Power Off slider.
  • To turn it on: press and hold the side button until the logo appears.

For the best performance from your watch, keep both Bluetooth and Wi-Fi permanently enabled on your iPhone.

It means your watch is disconnected from the phone, possibly because it's out of range.