Hey I got one of those bikes too, mine's red tho - don't the kickback from the pedals when the rear suspension bounces back up annoy you? Other than that great bike indeed.
The shock, the unofficial rule is that red knob is your rebound and blue is compression (most fork manufacturers abide by this as well actually, just makes things easier for the riders). Turning either one in (clockwise) will increase damping of the respective circuit. Do you have any other adjustment knobs available on this shock?