When you are presented with a menu for making a flag, the sliders at the bottom are the color pickers. They will help you pick a color. The circle next to those will show what color is currently selected. The eye dropper will allow you to pick a color off of the flag. When you are ready to see the wavy flag, press space! Then, when you are done, press space again, to continue editing your flag.
If you have any questions/suggestions, tell me in the comments!