Buddhism often has an idealistic approach to reality. The world as separate things and individuals is considered an illusion. So the flag and wind are products of the mind individuating from a singular reality. Or something along those lines.

Or at least it means the process of knowing about the flag and the wind is a mental one.

I interpret this as: the world is just exactly as it is, whereas "moving" is a concept formed in the observer's mind. IOW, the "true"/"hard" reality follows its own course and does not care about intertial frames or other conceptualizations.