The latest update to Apple's Mail app introduces a suite of new colors for flags, unique amongst even the best email apps on the App Store. The problem is they're hard to find — if you try to flag an email the old fashioned way, it'll use the default orange color, with seemingly no way to change it. Of course, there is a way, it's just a little out of the way.
To find the new flag colors, you need to open the message in question first. Next, tap the reply button in the bottom-right corner of the display, then tap "Flag." Mail will flag the message with the default orange color, but you will see the other six color options appear — red, purple, blue, yellow, green, and gray. Tap on the color you want to change it.
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To be clear, these colors are only meant to help you differentiate your flagged emails. They don't sort your emails into separate folders. In fact, if you use a different email app that supports flags, you'll find your flagged emails all sorted together under one color. Perhaps these apps will update in the future to support cross-app flag colors, but, until then, you'll need to use Apple's Mail app to take advantage of the new hues.