The title could be a reference to the 1995 multimedia CD-ROM "Bad Day on the Midway" by the avant-garde band The Residents. In one part of the game you can see through the eyes of a rat named Oscar, and when you do so, everything is a monochromatic red. The scene can be clearly seen in this YouTube clip, around the 38 second mark.
At around 00:32 on the 'Bad Day on the Midway' video, there is a sound very similar to the one appearing at 00:27 and throughout in 'Oscar See through Red Eye'.
Another sound that appears at 01:04 on the 'Bad Day...' video may be heard at 01:34 in the song.
This was the first preview track for The Campfire Headphase. It was initially released as a download on Warp's Bleep store on September 5th, 2005, nearly a month and a half before the album's official release.