Yep - if babies get moisture trapped alot, they can get thrush under their chin. Its the perfect environment for the bugs to grow!
Tegan - if its really red with some spots, I'd head off to the pharmacy and get some fungal cream. You dont have to get daktozin - that has zinc oxide in it, and is more meant for nappy areas. Just get normal daktarin or the no-name brand equivalent. About $10 a tube. Hamish has thrush in his nappy area and his mouth at the mo (and I have it on my nipples) so we are doign a big treating session here at the moment. Should clear up in a week, and then you have to keep putting the cream on for another week.

HTH