The album has been commercially successful in Australia and New Zealand, peaking at number three and number one on the charts of those countries respectively. It has also appeared on various Billboard charts. The lead single, country-pop song "Something in the Water", has peaked at number one on the New Zealand Singles Chart.
Fraser cited her move to Los Angeles as a major inspiration, saying "I was really frustrated and felt like I needed to get away and be somewhere where I could completely focus...and just to try and get a little bit of head space. It was the best decision we ever made". She called Flags "a graduation".
Writers of tracks on Flags include Fraser, her husband Scott Ligertwood, and Switchfoot's Jon Foreman. The album was produced by Fraser herself, which she called "one of the scariest things I've ever done".
According to Fraser, "Crows + Locusts" was inspired by a farming family, while "Ice on Her Lashes" is about death and grief. "Betty" is based on hiding things. The title track, "Flags", was brought about by cultural identity and injustice.
Flags was released by Sony Music Entertainment in Australia on 8 October, and in New Zealand on 11 October. Wood and Bone released the album in the United Kingdom and the United States on 12 October.
Flags received positive reviews from music critics. Jen Rose of Jesus Freak Hideout gave Flags five out of five stars, appreciating Fraser's versatility on the album, and noted it as a highlight of 2010 music.The Nelson Mail's Nick Ward praised Fraser's maturity on the album, noting the balance of both dark and joyful songs. John Brandon from Christianity Today lauded the "slick production and lighter tone" on Flags, rating it four out of five stars. Russell Baillie of The New Zealand Herald commended Fraser's writing and production skills, rating it four out of five. Andrew Leahey of allmusic said that Fraser "stretches her boundaries by focusing on ambience and atmospheric textures", and rating the album three-and-a-half out of five stars, dubbing it "a pleasant listen even during its weaker moments".The Dominion Post's Tom Cardy registered that while "Fraser works within the confines of conventional pop and rock...she largely avoids its worst excesses", also rating the album three-and-a-half out of five.
Flags debuted at number one on the New Zealand Albums Chart on 18 October 2010, receiving a gold certification the same week for shipping over 7,500 copies.Flags has gone on to achieve 3x Platinum sales in New Zealand being the 6th highest selling album of 2010. The same week, the album's lead single "Something in the Water" moved up two places into number one on the singles chart. This was the first time a New Zealand artist secured the top positions in both the singles and albums chart since June 2004, when Ben Lummis' One Road and "They Can't Take That Away" were number one. On the week ending 24 October 2010, the album debuted on the Australian Albums Chart at number three, going on to achieve Gold certification. The album entered the Canadian Albums Chart on 21 October 2010 at number eighty, giving Fraser her first chart success in the country. In the United States, Flags debuted on the Billboard 200 at number fifty-nine on 30 October 2010. The same week it also appeared on the Rock Albums chart at number nineteen, the Digital Albums Chart at number fourteen, the Independent Albums chart at number nine, and the Folk Albums Chart at number four.Flags was released in July 2011 in Germany, Austria and Switzerland and debuted in the following positions: #6 in Germany, #24 in Switzerland and #33 in Austria. One month on from release, Flags remained in the German top 20 at #13 and "Something in the Water" on the singles charts at #8. Flags was released in October 2011 in Hungary, reaching #15 on the national album chart by week by the 2nd week."Flags" was released in Sweden, Norway, Denmark and Finland on 7 November 2011.
"Something in the Water" has gone on to achieve extensive radio success in Europe, notably receiving BBC Radio 2 A-list rotation upon release. The single has reached #2 in the Dutch airplay chart whilst residing in the top 5 singles chart for 6 consecutive weeks. The single has charted in Poland and Belgium at #15 and #23 respectively, as well as being certified Gold in both Germany and Italy.