Continental red beds, widely formed at various geologic timescales, are sedimentary rocks and sediments with red as the main color. Geoscientists have analyzed the geomorphology, paleomagnetism, paleoenvironments, paleontology, energy, and minerals in continental red beds. Despite the agreement that fine-grained hematite is closely related to the color of continental red beds, controversies and problems still exist regarding the micro-mechanism of their formation. As a review, this paper details the composition and color properties of pigmentation in red beds, analyzes the existence and distribution of authigenic hematite, and summarizes the iron sources and the formation of hematite. In addition, we introduce the fading phenomenon observed in continental red beds, including three types of secondary reduction zones: reduction spots, reduction strips, and reduction areas. Lastly, this paper summarizes the evolution of color in continental red beds, emphasizes the relationship between authigenic hematite and the diagenetic environment, and proposes possible research directions for future red bed-related issues.