The "In Service" flag was used during World War I and World War II.

Each family was entitled to hang a small In Service flag in their window; the blue star in the center of the red-bordered white rectangle signified a family member in active service

The star was replaced (or covered) with a gold star (in practice, yellow or dark yellow) if the family member died in action. (Hence the name of the organization "Gold Star Mothers" of women who had lost sons or other family members in the war.) There were other variations to the star for missing in action, injured, captured, etc, etc, but flags of that sort are rarely, if ever, seen.