It is like a negative vote. If a comment is upvoted to the value of say $0.13 and then someone flags it whose voting power normally grants a $0.10 vote, then the comment (or post) will end up still earning $0.03. If it is downvoted into negative value, then it gets hidden from view (at least via the steemit platform), although it isn't censored because the user can still click to read it after all.
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Thank you for the info.