Right now 10k users on any given site can see flags from chat. The idea here, is that the 10k'ers will see the flags and then add their own to make the offensive content go away.
However, if a user views the flags and decides that they are not flag worthy, the notification stays in the chat window. There seems to be no way to get the notification to go away, and thus you can't tell when new flags are added, or if you are still seeing the old ones.
I think that once the flags are seen, the blue flag count should go away from the chat window.