The flags you see flying from ships are not there to make the ship look colorful.  They are used to send messages.  There is a flag for each letter of the alphabet.  Strings of flags can be flown to spell out messages.  Most ships fly a country flag and some fly a company flag.

One or two flags flying by themselves can have a special message.

The letter A can also mean "Be careful, I have a diver down."   The letter B can also mean "I am carrying explosives."   The letter G can also mean "I need a pilot to help me into harbor."   The letter P can also mean "Ship about to sail, everyone must come aboard." It is also known as Blue Peter.   The letter W can also mean "I need medical help."