This flag is something of a mystery! The text printed on the heading (100% Cotton RN 32335 3x5 FT) tells little and the simple design could correspond to a number of flags.
In the 19th century there were several horizontal bicolors of red over yellow. Ancona, although part of the Pontifical State, had as its own local flag one of this design. The Duchy of Baden flew red-yellow flags with two or more stripes. The port of Campeche, Mexico, required such a flag for ships registered there and the Austrian province of Burgenland claimed the same colors, as did the Belgian port of Ostende.
However, the collection flag does not appear to be from the 19th century and in any event it seems unlikely any of those territories would have marked a flag in feet and inches. It could have been the house flag of a shipping company, but yellow is uncommon in such flags.
The most plausible possibility is that this was a signal flag for naval communication. It is simple, memorable, and visible at a distance -- all requirements for a good signal flag. There have been numerous signal systems, many of them little used or even secret. US naval semaphore flags are red/yellow diagonally and a horizontal bicolor of red over yellow was used for signaling in the first decade of the 19th century by the US Navy.
Another possibility is that it may simply an "action flag" made for commercial advertising purposes as an attention getter. This seems more likely in light of the use of inexpensive cotton sheeting from which this flag is constructed.
ZFC Collectible Flag
