It is on but only effects endurance races, if you're tyres are red they're not dead they're just overheating, I had this with my Audi R8 5.2, front tyres where constantly red so I had to increase my braking zones at the end of long straights and leave the throttle a bit later and the tyres dropped back to cold again (I assume that is why you're asking the question as your tyres are red?)
When you say they are on, do you mean on online play?
I'm asking these questions, as they will decide whether I buy a PS3 (and GT5) or not.
I loved the GT series on the PSX. But ever since the devs decided to implement tire wear, GT has been ruined for me. Up until GT3, I could use a cheat.
But in GT4 that wasn't possible anymore.
If online games in GT5 are generally played with tire wear turned ON - and there is no cheat/hack that will allow me to turn tire wear OFF in offline/career mode, I won't be getting a PS3.
Yes, I know tire wear adds to realism, sure.
But how realistic is it that a 12 year old kid would be driving a $10 million super car @ 400km/h?

Not to mention crashing into a wall at that same speed, and be perfectly fine.
Realism is in the eye of the beholder.
I, personally, just hate it when my handling experince changes during a race. I want the same handling at lap 4 as I had at lap 1.
Not having that drives me crazy.
That's just the way I am.