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I've noticed that in a lot of my night shots of cityscapes, red lights (e.g. neon signs on buildings, etc.) tend to come out as big red blobs:
The above was taken with my Canon 500D.
What can I do to reduce this? (Either as I'm taking the photo, or as a post-processing step.)
What you're seeing in that shot is overexposure. Unlike overexposure in a day time shot,where the blown highlights tend to go pure white, the red light from the sign caused overexposure in the just the red channel. Thus all the different tones of red have become 100% red and detail is lost.
It can be fixed by reshooting at a faster speed / smaller aperture pulling up the shadows, or blending multiple exposures (using HDR techniques).
Did you shoot raw? If so you may be able to fix it without reshooting, by taking advantage of the extra headroom in raw to reduce the exposure. If you have Adobe Camera Raw there is a tool called "recovery" which attempts to fix this kind of blown highlights though it doesn't always work that well.
As well as overexposure, I believe there is some camera shake (look at the lighted windows to the left), which will tend to turn anything into a blob.
I'm guessing that in order to try and get enough light in for this mostly-dark scene, your camera slowed the shutter right down.
When the shutter is slowed down, any tiny movement of the camera can blur the image, as we see here.
Using a faster shutter speed, or steadying the camera with a tripod or similar would help.
The lights are being overexposed (almost certainly) because the camera is exposing for the scene as a whole. Most of the scene is very dark, so the camera thinks it needs to let in lots of light. This means that for the light areas, it lets in too much light, with the result that the neon sign gets blown out (especially the red channel - as @Matt Grum points out).
The fix for this is to dial the exposure down - probably using your "exposure compensation" control. Knowing when to do this will come quickly with experience. Fortunately, with digital you can always check on the back of the camera and reshoot if necessary. :)
Using your camera's spot metering mode would probably help, too, but it brings its own compromises. Check your manual for more details on this.
Some cameras allow you to see the histogram for each color channel side by side. That way you can tell if a single color was overexposed instead of the entire image.
