I believe these days it's just red food coloring, but as allans said above, it got it's name from the reddish color brought out from the cocoa powder. Wikipedia has a little history on it if you're interested-- http://en.wikipedia.org/wiki/Red_velvet_cake
My grandmothers recipe didn't use food coloring, just cocoa powder with boiling water added. Not bright red like some, more red/brown. Still delicious and one of my favorites to this day.
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