http://www.kipar.org/piratical-resources/pirate-flags.html
While the precise origin of the pirate flag is unknown, its ancestry
can be traced with some certainty. They were used to intimidate the
enemy or victim, and the flag was designed to conjure up fear and
dread. It was an important part of the pirate armoury, and was the
pirate's best form of psychological warfare, especially when combined
with a preceding reputation of not showing any quarter if opposed. If
a pirate could intimidate an enemy to heave-to without offering
resistance, then danger to the pirate crew would be eliminated, and
the victim's ship could be taken undamaged, thus maintaining its
value. Threatening images on the flag were often associated with a
known pirate (and hence his reputation), or could conjure up more
specific warnings. For example, Bartholomew Roberts bore a grudge
against the island colonies of Barbados and Martinique, so in their
waters he used a flag showing a pirate figure (presumably Roberts
himself) standing on two skulls. Under one were the letters 'ABH'
(standing for 'A Barbadian's Head'), and under the other was 'AMH'
(for 'A Martiniquan's Head'). The threat was clear and sailors from
those colonies would expect no mercy if they offered any resistance.
[This text taken from the website]
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