[whpalmer4]

No, flat file in this context means it isn't saved as a package file (really, a directory full of files masquerading as a single file) but as one file with multiple files stuck together (with the appropriate provisions for peeling them apart later). It has nothing to do with flattening layers in the Photoshop sense. The package file format can be more efficient when changing part of a document (don't have to rewrite the entire file), but they don't work everywhere.

On the Mac side, bring up the Document Inspector, Document tab, and the File Format chooser will let you pick from automatic, flat, or package.

As for iTunes, if you go into iTunes with your iPad cabled up, select the Apps tab on the iPad, scroll to the bottom and there's a section for transferring files to/from apps on the iPad which are coded appropriately to use this mechanism.