By clicking on the flag, you can get more detailed information on the location of the server. If you click with the mouse wheel, you can see the whois information for the website that you're visiting. This action can be changed in the add-on's preferences window.
You can change various settings for the information collected by the add-on, as well as its appearance. For example, you can choose between two different sets of flag icons. You can also choose to display the flag in the address bar or status bar, or on the left, right, or far right.
All this makes Flagfox quite an interesting add-on.