The proper use of a flag is for plagiarism or spam.
Unfortunately it gets abused in my opinion.
I write about a very controversial topic a lot (vaccines) and I am sometimes flagged just because people disagree with me. However most of those flags are low steem power and barely affect my payout. I wish it wasn't allowed to be used for simple disagreements. A post can potentially be flagged to the point that it greys out. This is a good thing for plagiarism and abusive behaviour.
A flag from high reputation account can lower your reputation.
If your reputation goes below zero, your posts will be grayed out and basically people won't see them. (Good in the case of spam.)
And a flag from a high steem power account will lower your payout.
Many of the high steem power (whales) don't even post much so they have low reputation, which means that at least your reputation isn't lowered.

It's complicated and the developers tried to put in a system of checks and balances.
I hope you hang in here a while and see how it goes.
Remember not to expect any payout, until it is paid.
I'm not sure when the next hardfork will be, but am hopeful that this type of flagging will stop soon.

We are still in Beta stage and these whales have called it an "experiment" to see how Steem distributes in a given situation. This experiment should end soon.