The "Christian Flag" was conceived by Charles Overton, who in 1897 was superintendent of the Congregational Sunday School at Brighton Chapel, Coney Island, New York, USA.1 (That community was incorporated as St Paul's Evangelical Lutheran Church of Coney Island in 1907, and it still exists today). On 26 September of that year, he gave a sermon musing about what kind of flag might represent the Christian faith, in the same way as the American flag represents the United States. Following on from that, he designed the emblem and formed a group (the Christian Flag Extension Society) to promote it. This included efforts to have the flag officially recognized by the US government, and adopted in its military chaplaincies. 2 The first flags made to his design were manufactured by the Annin company, which still makes them today. 3
According to Overton:
It is truly symbolic. The ground, which is five-sixths of the whole, is white, the universal peace color, representing peace, purity, and innocence. In the upper corner is a blue square, the color of the unclouded sky, emblematic of heaven, the home of the Christian, also a symbol of faith and truth. In the center of the blue is the cross, the ensign and chosen symbol of Christianity. The cross is red, typical of Christ's blood. Every sect of Christ's followers can indorse the flag, and it is equally acceptable to all nations. It stands for no creed or denomination, but for Christianity.4
Additionally, "white is recognized as the flag of truce on every battlefield, and as soon as a flag of this color is seen the cannon's roar is silenced." 3 It may be that the red-white-blue combination of the Overton flag was chosen to echo the colors of the American flag.
The Overton design violates the heraldic rule of tincture by placing the red cross on the blue canton. This seems to be unintentional, though the arms of the Kingdom of Jerusalem deliberately did the same (gold on white) as a mark of honor.
Some alternative flag designs were proposed in the same era, including the so-called "Crusader Flag", a red cross on a white field bearing the motto "In this sign conquer". Several individual churches or denominations have their own unique flags as well. Perhaps the flag of the Vatican is the only one of these that qualifies as intended to be universal, though of course non-Catholics are liable to disagree with the claim. Conversely, the "Christian Flag" is Protestant in origin and remains most popular among American Protestants.
1. Deruyter Gleaner, 18 August 1898, p8
2. American Sentinel, vol 14, no 17 of 27 April 1899, p262
3. Missionary Education in Home and School, R. E. Diffendorfer, NY: Abingdon Press, 1917, p183ff
4. The Epworth Era, 12 January 1919, p150