A bit like HMS Hood was the flagship of the WWII Royal Navy in the sense of being the biggest (well, longest), the most famous, and the one whose loss mattered the most.
I've never seen anything contemporary referring to Hood
that way, I think that would have sounded completely wrong at the time. Hood
wasn't even flagship of her fleet; the C-in-C flew his flag in Nelson
and then King George V
And it sounds completely wrong to me when it is said in TNG, but it sounded good to someone and we're stuck with it.