In MK2 Johnny Cage's red shadows are a glitch, most likely to be seen if you perform a lot of Shadow Kicks (never seen it with the Uppercut). Johnny's shadow trail will occasionally come out red, with an electrified sound effect. Whether it's there unintentionally, or a leftover from something they planned then scrapped I don't know.

Some people claim it does more damage than the regular one, but I've seen no evidence of this yet.

The red shadow kick does not cause more damage than a regular shadow kick. I played 11 battles of johnny versus johnny, taking turns doing shadow kicks to each other. Finally during the 11th battle one of them did the red shadow kick with the lightning. They had 3 kicks in each, so I let the timer run down to zero. Result: Draw. Next I checked for the red shadow uppercut. I gave up after literally doing 280 shadow uppercuts without an occurance of a red shadow. Hopefully this puts those two rumors to rest. I can make a video for proof if requested.