[brianogilvie]

Malisa--yes, you are right. If you flag a project or an action group, its children inherit the flag, but the inherited flag is displayed in a faded, translucent style so that you can tell that the flag was applied to the project, not the action.

The idea is that by flagging a project, you want to flag its actions too so you can see them in context mode if you filter by flagged items.