The Flag Inconsistent Formulas tool operates on the entire worksheet. It compares each cell with the surrounding cells and tries to determine whether there is an inconsistency.
There is a deliberate difference in wording between the Find Inconsistent Formulas tools and the Flag Inconsistent Formulas. With the Find tools, you explicitly set a range (columns or rows) that you expect the formulas to be the same in. With the Flag tool, Spreadspeed analyzes the entire sheet and makes an educated guess as to which cells are inconsistent. If the inconsistency is clear cut, it will mark the cell using the "Bad" style. If the inconsistency is not definitive, it flags any region with anomalies using the "Check Cell" style.