What is a flag?
It's basically just a boolean so it's either true or false.
So what's the point?
Booleans are fine, however, they get annoying and cumbersome to work with if you need a large amount of booleans and/or check a large amount of booleans. Construct only allows you to set or check booleans 1 by 1. This addon allows you to set and check multiple at once. E.g. "Are flags 'a b c d e f g' set" is a single condition that checks if all 7 booleans are true at once.
Another benefit is that they can be added and removed at will from objects. Need a flag on an object? Just set it, the flag doesn't need to pre-exist as is the case for booleans.
For documentation, check the example project. It's pretty straight forward.