What flag is that?

The flag of Gibraltar is in the picture. Gibraltar is a British Overseas Territory located on the southern end of the Iberian Peninsula at the entrance of the Mediterranean. You can see how far from the British mainland it is:

Gibraltar has an area of 6.7 km2 (2.6 sq mi). The Rock of Gibraltar is the main landmark of the territory. The population of Gibraltar is concentrated at the foot of the rock. More than 30 thousand people live there, which makes this small area the 5th most heavily populated territory in the world.

The flag of Gibraltar differs from the other flags of British overseas territories, as there is no Union Jack on it. The red castle on the flag represents the fortress of Gibraltar, which is showing the significance of the territory for Britain.