Nennius, a Welsh monk of the ninth century records how the red dragon was originally believed to be a symbol of political independence. His manuscripts describe that as the Saxons took control of Britain;
“King Vortigern the fifth century British King set out to build a castle on the top of Mount Dinas Emrys; not far from the village now known as Beddgellert in North Wales. However, at the end of each day the masons were hindered by earth tremors which destroyed what work they had done. King Vortigern summoned his council of wizards and asked them how to prevent this from happening. It was not until a young wizard named Merlin suggested that they dig into the hill to find the source of the problem that they uncovered an underground pool. Within the caves they discovered two sleeping dragons, one large and white and another smaller red dragon. Disturbed from their sleep the dragons awoke and immediately began to fight, shaking the mountain around them. The white dragon seemed to have the upper-hand as it drove its opponent to the ground. However, the red dragon kept fighting eventually causing the white dragon to retreat and fly away”
Nennius states that the story was in fact a prophecy; predicting the victory of the British and the eventual expulsion of their Saxon conquerors.
A little snippet of my Masters Dissertation, investigating the myth surounding the Red Dragon of Wales, the symbol depicted on the national flag. :3