Exhaust Gas Temperature (EGT) provides pilots a way of monitoring the fuel/air mixture in the engine. It uses the stoichiometric mixture (where Fuel and Air are perfectly balanced so that there is no unburned fuel and no unburned oxygen at the end of the combustion event) as a reference: At this mixture the EGT is at its hottest ("Peak EGT"). Making the mixture richer or leaner will reduce the EGT, and all other mixture settings are described in terms of "Degrees Rich of Peak" or "Degrees Lean of Peak". //

The area of the chart from peak EGT to about 100 degrees Rich of Peak is often referred to as "The Red Box" -- in this range the fuel/air mixture has a low detonation margin, and the combustion event is producing the most internal stress on the engine components (cylinders, pistons).
As you can see from the Lycoming chart the Cylinder Head Temperature (CHT) peaks in this range, and there is a risk of exceeding the CHT limits and seriously damaging your engine by operating in this range for extended periods of time, particularly at high power settings.