Definition: A false lead.
Origin 1: The commonly accepted explanation is that when training scent hounds the practice was to drag smoked or cured fish, not neccesarily a herring, along the ground to create a trail of scent for the animal to follow. As the dog got more proficient and started following the much fainter scent of an animal the trainer would drag a red herring across the trail. If the dog could ignore the strong smell of the herring and follow the original scent it was deemed fit for the hunt.
Origin 2: According to Wikipedia, Origin 1 is a fallacy, and the practice of using a red herring to train dogs is questioned. The idiom reportedly comes from an article published 14 February, 1807 in the polemical Weekly Political Register where the journalist William Cobbet criticised the English press for mistakenly having reported the defeat of Napoleon.
Source: Wikipedia and The Free Dictionary