Thomas A. Anderson is a man living a double life. One, working for a highly respectable software company. Two, a hacker under the alias "Neo." The Matrix follows the progression of Neo going from regular guy to being exposed to the Real World. The revelation comes in that the world Neo thought was real was actually The Matrix, a computer program developed by machines in order to use human beings as batteries. Neo is thought by Morpheus - a person Neo has been desperately trying to find in the "real world" - how to control the Matrix. Morpheus feels Neo is the chosen one, the one who will set everyone free from the Matrix. Neo, along with everyone else involved in these missions, are constantly being pursued by Agents, sentient programs whose job it is to isolate those who hack into the Matrix and remove them.
Chosen answer: The pills are the Matrix representations of computer programs. The red pill contains code designed to disrupt Neo's input/output signals, so that Morpheus' team can pinpoint his physical location in the real world. Once located, a signal of unspecified type is sent from their ship, which presumably serves to wake Neo up.
Tailkinker ★