Boolean Modifier Red Won't Work or Behaves Strange I'm using Blender 2.73 on MacOS. 

I've been happily blending away for months since the last time I had a prob with modifiers. But not much issue lately. Suddenly I had a crash (I was subsurface-modifying and it went into a perpetual spin that wouldn't finish.)

I lost some work, but picked up from my last save again and kept going.  As I came to the steps where I need a few boolean difference operation, I couldn't use it anymore - it's shaded red (see pic) and it failed to apply.

I added a cube and tried with that, and it failed to apply also. 

I created a new empty file (below), and it also shows boolean as red, and when I try to apply, it does strange things. Intersect instead of difference etc.


Here's a copy of the file for download - just two cubes. Can you see some setting that's precluding me from using the boolean modifier or making it behave weirdly? 

Question then is what does the red shading indicate? I searched the docs for "boolean modifier" and "red" and can't find any explanations. Googled wildly without any success.
It's red because there's no object selected to Boolean with. When I picked the other Cube it worked fine.



The "Cannot Execute Boolean" is because of this beauty:



In this case the geometry was obviously a bit untidy. But it can happen that this similar situation happens at much smaller scales, which are less easy to see without zooming in. In this case the manifold check in the 3d printing tools doesn't pick it up either.