International maritime signal flags have developed over centuries to provide communications with ships. Among these there is a set of standard letter flags that could be used to spell out words; nowadays the individual letters are referred to using the NATO phonetic alphabet. However, to simplify matters, frequently used messages are often represented by single letters (single flags) or by two-letter combinations.

Bravo Zulu is one of these standardised messages. The flags for B and Z, when hoisted together, traditionally meant “manoeuvre well executed.” According to the US Navy the meaning of this flag combination has now developed into a more general “well done.” It is used in this way by the Royal Navy, Royal Marines, Royal Australian Navy, Canadian Coast Guard, US Navy, US Marine Corps and other organisations. The picture shows a Canadian craft flying this Bravo Zulu two-flag combination -- the solid red flag is B (Bravo) and the multi-coloured flag underneath is Z (Zulu).

The BZ formula is not confined to signalling at sea or by radio. It is also used to congratulate or compliment colleagues and subordinates for outstanding performance and it has become a standard conversational form amongst members of the maritime services. In the Royal Navy, when the sovereign wishes to reward the crew of a British warship with the order to "splice the mainbrace," (issue the crew with an alcoholic drink) it is usually followed simply with Bravo Zulu.

More Info: en.wikipedia.org