To indicate receipt
The main use for the answer pennant is for the receiving ship to indicate that it has seen and understood the signal hoisted by the other ship. When a ship sets a signal, the receiving ship sets the answer pennant "at the dip", i.e. halfway, as soon as it has seen the signal. Then, when the receiving ship has understood the signal, the answer pennant is hoisted "close up", i.e. to the top.
You can test this between the two ships above. Key in a signal, for example ZD2, in the text field and hit the "Click!" button (not "enter") and see what happens...
To indicate decimal point
In a numeric hoist, the answer pennant can indicate the decimal point - try entering 4.50...
To indicate that the ICS is being used
If the answer pennant is flown at the top of a hoist by a naval vessel, it indicates that the vessel is using the International Code of Signals, rather than its own. (You can see what that would look like by entering .TG for example - with a decimal point first.)
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