For many hundreds of years flags have been used for communication.  Because flags are light-weight, can be hung or tied in high places and can therefore be seen from long distances, it has always made sense to use flags as a means of passing on messages.  This is why important organizations such as the Navy and the Army have relied upon flag communication throughout several wars and high-profile engagements.

Naval communication flags have been around for many centuries and have not changed too much from the style and system that people like Christopher Columbus used whilst exploring the New World.  Naval flags have two divisions - there are national flags, called ensigns, that show the origin and affiliation of the craft, and there are communication flags which can be arranged in pre-set combinations to pass on messages from one craft to another.  It is important that ships in foreign waters show their ensign flags at all times so that they are not mistaken for enemy craft.  Proper identification can prevent skirmishes, full-scale battles and even wars.

Communication or signal flags are also important for this reason - they ensure that messages are received quickly and accurately so that orders can be followed.  The signal flag range is now governed by the International Code of Signals, and allows all ship crews no matter what their nationality is to communicate with one another.