This is the national flag of Scotland, "St Andrew's Saltire". It's a rather dull blue and white. However, Scotland also has a much cooler flag, the Royal "Lion Rampant" Flag, shown below:
The use of the "Lion Rampant" flag is restricted to use by Her Majesty The Queen or her representatives. However the Scots were given permission from George V to wave the flag by hand as a sign of loyalty.
Despite permission only being given to wave the flag by hand, there has been a trend by tourists in recent times to purchase and decorate the Lion Rampant flag of Scotland. One such example appears below. (Flag courtesy Trevor Hopkins.)
Geographically, Scotland comprises the nothern part of Great Britain, and has England to south. It also covers a number of island groups, including the Herbrides, Orkney, and Shetland. That's right, they named an island after a breed of pony.
Scotland contains many large towns, including Edinburgh, Glasgow, Stirling, Aberdeen, Dundee, and Inverness. People in Scotland speak English, but with a very amusing accent. Some of them can also speak in Gaelic, which is one of the coolest sounding languages ever invented.
Historically Scotland was divided between the English-speaking Lowlands, and the Gaelic-speaking Highlands. The highlands invented the idea of clans, which are still used today in many on-line games. Scotland is also home to Loch Ness, which is famous for its monster.
You can read more about Scotland on Wikipedia. You can also read about Gaelic.
There's even a Wikipedia in Gaelic. Sweet!
Technical clue provided by Perl Training Australia