Flags were a type of item in Club Penguin that represented real-life flags, and were similar to pins, as both were placed in the top left corner of a Player Card when worn. Each flag cost 20 coins and could be bought by all players, and were located at the back of the Penguin Style catalog.
There was a glitch in 2007 which often occurred when a penguin's membership ran out; if the player was wearing a flag at the end of its membership, the flag stayed on their Player Card. This glitch no longer worked as flags could be purchased by any penguin.
Different flags were used to code a message written by Herbert in issue #238 of the Club Penguin Times where the flags corresponded to the first letter of the country they stood for.
It was mentioned on episode 13 of The Spoiler Alert that many players requested the flags released on the March 3 update to be made.