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Answered 2004-05-09 13:47:29
My recollection of a book I read once and found hysterical is that this tradition goes way, way back, to Baseball in the 1880s. In a old, old book by a man named Richter called "History and Record of Base Ball" I distinctly remember reading that in the rules drawn up by one of the old baseball leagues, (it may have been the National Association of Base Ball Clubs) one of the decrees suggested something to the effect that part of the moneys collected by the league would go towards the purchasing of a championship "streamer", which was to be given to the club that won the championship and flown outside their home field for the next season. Whether or not this is the first record of a flag/pennant/streamer being used as an award for the best team, I'm not sure. It is a tough book to find but certainly a great one if you are interested in the game's history.
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