Because of their potential use as functional ingredients in human nutrition, oligosaccharides derived from natural sources are receiving paramount consideration. Red seaweed, a proven rich source of agar and carrageenan, is one of the most abundantly present sources of such oligosaccharides. Agaro-oligosaccharides (AOS) and carrageenan-oligosaccharides (COS) are produced from agar and carrageenan, respectively, through chemical and enzymatic hydrolyses. Enzymatic hydrolysis of agar and carrageenan into oligosaccharides is preferred in industrial production because of certain problems associated with chemical hydrolysis, including the release of high amounts of monosaccharides and undesirable toxic products, such as furfural. AOS and COS possess many biological activities, including prebiotic, immuno-modulatory, anti-oxidant, and anti-tumor activities. These activities are related to their chemical structure, molecular weight, degree of polymerization, and the flexibility of the glycosidic linkages. Therefore, the structure–function relationship and the mechanisms occurring during the specific biological applications of AOS and COS are discussed herein. Moreover, the chromatographic separation, purification, and characterization of AOS and COS are also part of this review. This piece of writing strives to create a new perspective on the potential applications of AOS and COS in the functional food and pharmaceutical industry.