How they were created is hitherto unknown. They might have been crossbreeds between goblins and hobgoblins and/or trolls. Unlike ordinary goblins (who are small, stupid, and cowardly) redcaps are a breed apart. They are four feet tall (a good foot taller than the average goblin). They are as cunning as humans (making them efficient commanders). Also, they are fearless (to a redcap, surrender is the ultimate disgrace).
Redcaps are bred in goblin territory, in places where blood is shed. Dungeons, trenches, ect., are ideal redcap spawning grounds. This is due the fact that redcaps are given a depraved lust for blood. In fact, redcaps are so named because of their red helmets. Before and/or after battle, they fill their helmets with enemy blood and put them on forthwith (fueling their addiction and enhancing their ferocity). In addition to their helmets; redcaps wear red armor and are armed with pike-staves.
Redcaps were bred for the sole purpose of commanding goblin squadrons. This is necessary; as goblins are cowardly and panicky when they're alone, but fearless when they are being lead by superior creatures (redcaps, trolls, and/or hobgoblins). Due to this, redcaps answer only to goblin chiefs and goblin kings.