Flag Pole
From Kerbal Space Program Wiki
The flagpole is one of the buildings (The term being used loosely in this situation) in the Kerbal Space Center. It is used to select the default flag for your misions. It is located in front of the Astronaut Complex.
Custom Flags
You can design custom flags for your game by going to your Gamedata folder, making another folder inside for your flags segrigated from the others, and inserting an image into this folder that fits the correct sizing (256x160). You can find this folder in Steam/Steamapps/common/Kerbal Space Program for steam installations of the game.