Flag (*) is the command which allows users to manipulate the status flags which appear on the left side of the FOLDER INDEX screen. The most common use of this is to mark a message as important. This is something of a note to yourself to get back to that message: it has no effect on the way in which Pine will treat the message.
You can also use the flag command to set (or unset) the flags which indicate that a message is new, deleted, or answered.