Wayne, according to my Western Maryland Railway "Rules for the Government of the Operating Department" (July 2, 1939), white flags were to be displayed on the front of the engine of all "Extra" trains, while green flags were to be displayed on the front of the engine of each section of a multi-section train (except the last section). At night, white lights and green lights were to be displayed respectively (along with the flags). Presumably an engine without flags was heading a scheduled, single-section train (or was the last train in one comprised of multiple sections).
I've got a Lionel 258 that has flags too:

A number of the prewar Flyer steam locos have stanchions for flags, as well as most of the Lionel and Flyer electric-profile locos.