When I press the 'REC' button, the Game Recorder just flashes red and green.

This issue will occur when trying to record protected content to a USB storage device. If you have a Playstation 3, you will need to use the supplied component or composite cables to record your game play. If you are using a Playstation 4, you may turn off 'HDCP' in the settings and can use a HDMI or component cable.