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M78 is a reflection nebula, that is we see it because light is being reflected off the nebula from a nearby star. This is the cause of it looking blue as the blue light is selectively scattered back to us while the red light mostly goes through and we don't see it.
@Hobbit_Habit it's actually due to a slight widening of some of the stars on the red plate due to tracking and high level ice crystals. It was taken with a reflecting telescope and is made up of images from different filters.
