This is not a glitch nor did another player spot you. You spotted yourself. It's a feature on certain servers. You can see your exact location on the map and if you get close enough to see another player, he will show up on your map as well as another blue circle like yours.
There used to be a different skin for bandits, but you can no longer tell who is a bandit and who is not. Simply, they are a bandit if they killed other innocent players, but there is no way for you to know. KILL THEM! >:(
Another player with the same skin teleported onto my brother's location with a multicolored smoke bomb, playing this same exact music. : http://i.imgur.com/IfaZT.jpg
OMG THIS JUST HAPPENED TO ME AND MY BROTHER AND MY FRIEND AND MY FRIEND AND MY SISTER OMG THE WORLD IS COMING TO AN END... now on a serious note.. What's going on? :(