The flag is used in PvP to mark which team posseses a feature of the map:

• In GvG this is the flag stand at the center of the map, which gives the controlling guild a Morale Boost every 2 minutes.
• In the Global Tournament, Codex Arena, and Random Arena teams use the flag to control Obelisks, which automatically attack opposing players.
• Holding a flag will slow down your movement speed. It also tends to make you a primary target, so speed boosts are almost vital when carrying flags for any extended length of time.
• It is estimated that the flag will slow a holder down by 20%.