These two sentences are supposed to mean basically the same thing:
Это был случай одного красен.
Это был случай услуга за услугу.
Both can be translated to
"It was a case of one good turn deserves another."
Is this correct?

услуга за услугу is supposed to literally mean "favor for favor." Is that correct?

Is красен as it appears in this sentence the short, masculine form of красный or is it a form of a different word?