Cook onion in butter or margarine in a medium skillet about 5 minutes or until tender; cool.
Combine cooked onion, sour cream, salt, black pepper, and red pepper in a blender container or food processor bowl. Cover and blend or process until nearly smooth. Transfer to a small bowl. Stir in snipped chives. Cover and chill for 1 to 24 hours.
Before serving, stir in a little milk, if necessary, to make of dipping consistency. If desired, garnish with fresh chives. Serve with chips and/or sliced vegetables. Makes about 1-1/2 cups.