Firstly, I see that this discussion has come up in the past, but now that we're in beta and have had a lot of opportunity to interact, I think it's important to raise again. Because right now, interaction among ships is tough.
Flags were important means of communication for merchant vessels and pirates alike. That's why the Jolly Roger became so important. The Pirates would get close enough to the ship to be in attack range, and then raise the pirate flag to signal "Hey dummy, give me your stuff or we open fire."
Likewise, vessels would use white flags or other colors to indicate things like "I have a message for you" or "I'm in danger and need assistance". These are the things you can see from your telescope to assess the situation.
I'd love to see a very basic form of this in the game. Right now, when I see a ship in a distance, I have no way of assessing its intent. Maybe that crew over there really is looking for other friendly crews to go sailing with. I'd like to know that before I go to the effort to head their direction just to have them cannon ball me. If I'm actively trying to avoid fights, I have no way of trying to find people who aren't in the fighting mood, like myself.
OF COURSE this system can be abused by people who raise the "Friend" flag and then turn on you. And that's WELCOME. Keep the pirate aspect.
But if I saw the friendly flag, I would at least be willing to make the 50/50 guess that they could be up for some drunken dancing, and not trying to kill me. And if it turns out I'm wrong? Eh.... frakkin pirates.
