Wave, ye brave banner, wave in the wind...
The Flag represents the finish line in any level in Kid Chameleon.
Instructions for use
In order to exit a level, just touch the flag. As soon as you do, all enemies and hazards will volatilize, the holograms will vanish and your score for the level will be summed up to your total.
Then you will be transferred to the next level.
Flag Knowledge
Levels contain only one flag, or none. In particular, Elsewhere levels, some secret levels, and most levels in the 4th stage do not have a flag, and thus players must exit through a teleporter. This means that these levels will never give you any points for time, no-hit bonuses and so on.
In Boss levels, you cannot leave the level until you have killed the boss heads in question, then the flag will appear.
Trivia
Maps "without flags" actually have their flags located far out of bounds, defined as 0xFFB0 for their X and Y positions. Hidden Canyon's flag is the sole exception to this rule, with 0x740 and 0x510 for its X and Y positions, respectively.