There are six American flags on the surface of the moon, one for every Apollo landing and base that was set up during the missions to the moon.
The original flag cost $5.50, presumably off a Hardware store shelf. The team who engineered it operated in secrecy, as planting a flag on the moon in the first place was a delicate issue: the United States was side-stepping its own international treaty which "bans the national appropriation of outer space or any celestial bodies."
The waviness in the flag is a result of the faulty telescoping rod on the top, which the flag was sewn around. The astronauts struggled with getting the rod to extend all they way (you can see this in the footage) but did the best they could, hence the ripples in the flag.
Because NASA wanted all of the flags to have a similar look, they engineered the following telescoping rods for each remaining flag to have this flaw, which gives the flag the appearance of waviness.
At this point, there is speculation that the flags are now either bleached white by the sun or possibly were destroyed during the lift off of the lunar module(s).
To see them setting up the first flag:
http://www.youtube.com/watch?v=k1B2UPkelNw
For more on this, check out this article:
http://abcnews.go.com/Technology/Apollo11MoonLanding/story?id=8113235&page=1
-Rob Faucette
