What does it mean if the camera on my iPhone has a little red dot in it? Is this normal?

I purchased an iPhone 5s a couple of days ago and as I was using it one night in the dark and I noticed a red dot in the camera. This has really spooked me because I think I'm being watched, please tell me what you think about it.

It's aliens watching your every move.

Seriously, it's called a proximity sensor. It senses when your face is near the phone during a phone conversation. Don't worry, it's harmless.

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