It is merely advisory, although drivers can be called in for not checking their mirrors. There is no passing allowed from the flag to the incident. Again, no passing until you pass the incident. Anything that could create a hazard. Normally kept up for 1 lap until everyone has seen it, then it is dropped.
Reasons vary from rule infractions to a mechanical problem that requires immediate attention.
It is also displayed for 2 stations for a slow moving race vehicle.