What are appropriate audio levels.

-12 and -6
-6 and 0

Should it peak at the yellowish area and never hits red.

You don't want anything to touch 0 ever at all. It can come close, but don't let any audio "peak" (red) ever. Have your dialog average around -6, adjust other audio around that.

Some audio engineers like to average dialog around -12 if there's lots of audio dynamics such as loud sound effects, soft whispering, etc.

I generally use -6 as a top limit for most of what I do. This covers general corporate, government presentation and testimonial type of stuff.

Some audio will have extreme varying levels, such as outdoor events, sporting activities, racing, etc. making it more difficult to find the average level. For these type of projects, I still use -6 as my baseline, but realize some portions may jump over a bit. If necessary, I keyframe these over -6 levels down so they don't exceed -3 or -4.

For Indie Films and projects that you desire to have a high dynamic range, -12 is very common for dialog and leaves sufficient headroom for the rest.

Right, you need to target the Dynamic Range of the playback devices. which is measured in decibels the distance, so to speak, between the lowest acceptable audio level and the loudest acceptable sound level. Movie theaters have more dynamic range in the system's audio reproduction than a TV set does.

Proper use of compression is very valuable.

Thanks BenB and Dgwvideo.

If you're creating material for broadcast, you need to work to the recent CALM standards:
www.tvtechnology.com/article/lkfs-amp-the-calm-act/208806

Most of the levels suggested here are way hotter than is currently broadcast legal.

"Most of the levels suggested here are way hotter than is currently broadcast legal."

Actually no, what we're suggesting here are very much within even the new (and overdue) FCC's CALM standards. The levels suggested here are very much broadcast legal. Take them down any more and you won't have enough level to even hear the audio!

Note that article, being fuzzy on detailed info, never explains the translation between db and LKFS, for where there is no direct conversion.