Flag for a convoy commodore, per the U.S. Navy specifications.  A convoy commodore is the person (usually civilian) in charge of the merchant ships of a convoy, and the flag is flown from the commodore's when forming (or reforming) the convoy, and other situations when the commodore's ship needs to be identified.

Convoys were heavily used in World War II and before, but rarely since.  Since they are still sometimes used today (such as Operation Earnest Will),  the flag is still defined in current regulations.  For more information, see here, here, here, and Navy document NTP 13(B), section 907.
Own work
Carl Lindberg