So, long story short, the file extracted from the `*.tar.gz` was a kind of raw Commodore 64 program, which the VICE emulator wouldn't open unless you hit the "Autostart" option instead of "Open" in the automatic file chooser dialog (Alt + A). 
Then, you'd see a white screen with a flashing text about "Watchman of FairLight" being the author of this little demo. The background is white which correlates with the challenge's name - the flag text is also white and we need to choose something else in order to see the text.
Hit Alt+H to open the debugger, enter `> d021 02` in order to change the background to brown and hit enter. Then type `return` (gdb `continue` equivalent) and hit enter again. The flag should then become visible with a wavy floating effect moving the letters around.
The flag was `FAIRLIGHT30YR`.
Fun fact: The weird "sine wave" near the end of the file is actually a motion track mask used to set the height of each flag letter while executing the wavy movement pattern.
See the link for a more in-depth description.