Flags are now global, not local. Previously you could create a dumb collection, and mark pictures with the Pick flag (P), Reject (X) and unflag them with U. It confused some people when those flags weren’t visible when they looked at the pictures in their original folder or in another collection. The idea was that you might want to flag images in different ways in different circumstances, so if you imagine a wedding you might have the same photos in a For Album collection, also in a For DVD, and use flags to shortlist pictures separately. This “local” nature cut both ways – confusing some, enabling others – and my own attitudes have changed over time from initial dislike to finding it a useful feature. But with LR4, flags are now as global as star ratings and coloured labels, and if you’ve been using them locally you’re simply going to have to change your working practices.
For myself, on balance, I would have preferred flags to stay as they were, but I do mostly use them in a way that won’t be impacted by the change and accept that it will reduce confusion. If you do find the loss of local flags breaks your way of working, then I think you may want to look at the new possibility to stack photos within collections.
Personally, I have never been a big fan of stacking. In general, I feel it’s a great way to forget pictures exist and fail to mark them up with copyright and other metadata. So I’ve restrict my use of stacks to grouping the component original frames of panoramas, HDRs etc, and don’t really like the thought of extending that use any further. But in collections, now flags affect the entire catalogue, the new ability to stack items within collections may be the way to pick and reject images.
Being a bit cynical, it should help sales of my Syncomatic plug-in.