Which skin condition is characterized by red and peeling skin that can indicate potential cancer?

The condition characterized by red and peeling skin that may indicate potential cancer is actinic keratosis. This condition often appears as rough, scaly patches on sun-exposed areas of the skin, which can be red or brown and may peel. Actinic keratosis is considered a precancerous condition that can develop into squamous cell carcinoma if not treated.

While squamous cell carcinoma can present with red, peeling skin, it is typically associated with other features such as a firm red nodule or a sore that does not heal rather than merely peeling skin. In contrast, basal cell carcinoma usually manifests as a waxy bump or a flat lesion with a depressed center. Melanoma, the most serious type of skin cancer, often appears as a new or changing mole rather than primarily showing red and peeling skin.

Thus, among the options, actinic keratosis is the most accurate choice associated with red and peeling skin indicating potential progression to cancer.