I will use the conversation that I made while doing all the other conversations. In the new window you'll get a list of available flags to set, but since you haven't made any yet the list will be empty. Click Edit Flags. Then type in the name of your flag and click Add. Then click close and your new flag will appear in the list.
All flags start off with a value of False.
Select your new flag and make sure that the value True is set. If your using several missions you need to think wheather your flag will be important for the next mission. If it isn't then set the Mission Expiration to the mission number. Then in the Set Flag window click Update. Some time later in your conversation you'll want to check the value of your flag and then decide what to do.