This effect was generated in Filter Forge, a Photoshop plugin that allows you to create your own filters.
This filter turns an image into a waving flag.
Works on non-square images with either horizontal or vertical flags. For increased reflections on the flappy end, increase the 'Surface Height' slider under the Lighting section.
Please check the comments section for better examples of this effect.
Thanks to ThreeDee and uberzev for their development of the 'Proportional Gradient' snippet.
Flag flags wave wind blow hang
This filter has earned its author one of our rewards. They are given to the authors of popular filters and include a free copy of Filter Forge.