Speaking to director Joe Johnston, it appears that one of the themes of the movie is that the Super-Soldier serum tends to bring out the subject’s inner self, transforming the good-hearted Steve Rogers (Chris Evans) into the heroic Captain America, and the Nazi Johann Schimdt into a malignant monster.
This paralleling of Captain America and the Red Skull was also seen in the barely released 1990 CAPTAIN AMERICA film, but Johnston says in the article he never saw that version.
Originally in the comics, the first Red Skull was an American Nazi sympathizer/agent named Maxon who simply wore a mask to conceal his identity.
Eventually his supposed spymaster, the “original” Red Skull was introduced. He was supposed to be Adolph Hitler’s personally-trained protege, the ultimate Nazi—bizzarrely costumed and masked to help instill terror in his subordinates and victims. So good was he at this work, it was said that Hitler himself began to fear the Skull.
Like the Steve Rogers Cap, he survived into the modern day via suspended animation, his name disclosed in time to be the non-descript Johann Schmidt.
During the cold war another Red Skull, retroactively revealed to be the Communist agent Albert Malik, assumed the role. He fought a retconned Captain America successor, and eventually caused the deaths of Peter Parker’s secret agent parents.
Entertainment Weekly offers this first official still of Hugo Weaving as The Red Skull in CAPTAIN AMERICA: THE FIRST AVENGER.
From previous statements, it seems the character’s appearance is a mixture of make-up and digital effects.