Flagging photos in iPhoto is a convenient way to mark photos you want to upload, print, or return to later to edit. Flagging is quicker and easier than creating an album and dragging photos into it to upload or edit. If you recently upgraded from iPhoto '09 to iPhoto '11, however, you may have noticed a slight change to the way photo flagging works. In iPhoto '09, you could simply click on the gray flag in the upper-left corner of a photo you were viewing to flag it. (The gray flag turns orange to confirm your command.) Now, in iPhoto '11, those gray flags are visible only when viewing the top-level, thumbnail view of photos (which doesn't make any sense, since it's usually difficult to ascertain whether a photo is flag-worthy until you see a larger shot of it).
When viewing a single photo in iPhoto '11, you have two options for flagging it. From the menu bar, you can select Photos and then click Flag Photo. When you are working your way through a large batch of photos, however, this method can be painfully slow. Thankfully, there is a keyboard shortcut you can use. When viewing a single photo, hit Command-period to flag a photo. Hitting Command-period again on a flagged photo will unflag it.
You can then view all of your flagged photos by clicking on the Flagged header in the left-hand column. From here, it's easy edit photo after photo or highlight a group to upload or print.
One word of caution: Apple views flagging as a temporary measure to highlight a photo. This could be a problem, as it was for me, when you upgrade to a new Mac. When I transferred my iPhoto '09 library to my new MacBook Pro running iPhoto '11 earlier this year, none of my flags made the leap. All of my photos were there, plus all of the various albums I created, but the thousands of flags I used to highlight album-worthy shots went missing. Thus, if you are going to use flags as a way to highlight your best photos, you might want to create an album of all of your flagged photos before transferring your library or upgrading to a new version of iPhoto.