FLAGs, or "bitflags" are, according to the Modmaker's Guide:
A way to store "bits" of info. Used for various options that can only be turned on or off. In Weird World Quest System a bitflag line usually starts with the FLAG command followed by a list of properties you wish to turn on.
So the FLAG command shows up all over the place in .ini files. You'll find FLAGs in races, weapons, stars, you name it. It's usually very early on in a file, but the exact placement depends on what type of file you're looking at.
Here's a list of FLAGS, sorted by the type of file they tend to appear in:
Mixing FLAGs from the "wrong" types of files is largely untested. It could give fun results, but also might cause crashes. Please test and document thoroughly, in case the problems don't manifest immediately.
P.S.: If anyone can think of any flags I've missed, please point them out. It's a big list, and was tricky to compile and sort.