Each flutter of the flag in the breeze denotes a prayer blown by the wind to spread good will into all pervading space. Every thread unravels, flies away and carries the prayers and mantras to promote peace, compassion, wisdom and strength.
The flags are always arranged in a specific order, from left to right: blue represents the sky, white represents the air, red symbolizes fire, green symbolizes water, and yellow symbolizes earth. All five colors together signifying balance.
I have seen prayer flags flown from stupas and mountain passes in Tibet, Nepal, Northern India, Bhutan and at my home. It is always important to respect and acknowledge their religious meaning. Buddhism is a complicated religion, but learning about the actual teachings of the Buddha has benefits. People find the teachings relevant and helpful in their own lives, including meditation which has been proven to have benefits even according to Western science. Buddhist belief is strong in the power of prayer flags which include mantras from three of the great Buddhist Bodhisattvas: Padmasambhava (Guru Rinpoche), Avalokiteśvara (Chenrezig, the bodhisattva of compassion, and the patron of the Tibetan people), and Manjusri, to be carried on the wind.
Prayer flags are to be treated with respect and not ever touch the ground. Disposal can be by burning them, but they are not to touch the ground while they burn. The smoke carries sacred blessings. I always keep my flags flying, getting old, fading away and allowed to slowly disintegrate.
My main reason to hang prayer flags is to spread positivity far and wide.