The phrase first appeared in print in the 'Boston Journal' in 1884, meaning any form of excitement or situations where people were very loud and clearly enjoying themselves. I suppose it was based on the fact that red is generally seen as a cheerful - even fiery - colour. Painting the town thus, metaphorically speaking, made it a brighter, 'louder' place.
Obviously none of us are old enough to remember what it originally meant. :lol:
Here's another one: :lol:
Paint the town red - go on a spree
Several attempts have been made to explain this. The most persuasive locates its origin in an actual piece of drunken vandalism by the Marquis of Waterford and a bunch of his chums who, as an aristocratic joke, actually painted parts of the local town red in the area of Melton Mowbray, Leicestershire, in 1837. The incident created sufficient stir to be recorded in contemporary verse and engraving.