The substances in chili peppers that give them their distinctive heat are called capsaicinoids. The primary capsaicinoid, capsaicin, is so hot that a single drop diluted in 100,000 drops of water will actually blister the tongue.
Depending on your sensitivity to capsaicin, you will either want to wear thin rubber gloves when you handle chilies, or handle them as little as possible and then immediately wash your hands in hot soapy water. With or without gloves, do not touch your eyes while you are cutting the chilies. And don’t forget to wash the utensils and cutting board after use.
The same caveats apply for dried hot peppers, with one additional caution: When grinding them (by hand or in a food processor or blender), be careful not to inhale the fumes or let them waft into your eyes.
The capsaicin is primarily concentrated in the pepper’s membranous ribs (and not in the seeds as is commonly believed), so removing the ribs can help to reduce the chili pepper’s bite. (Of course the seeds also impart considerable fire because they are in close contact with the ribs, so remove them, too.) With chili peppers, you will find that even those of the same type vary in hotness. So use the amounts given in a recipe as a guideline, but then add chilies a bit at a time, until the food reaches the amount of “heat” desired.
See also: Can Spicy Food Boost Health?