Why would any one hang a flag upside down?

In China the Word for "upside-down" is "dao" which is usually followed by the modifier "le" which signifies a completion of a sentence or past-tense.

Usually, you will see a character for "Fu" which means fortune turned upside-down. This is attract the attention of others to say "Hey, your 'Fu' character is upside-down!' to which in Chinese would sound like "E! Ni de 'Fu' dao le!" which sounds like "Your 'Fu' has arrived.

If you are referring to the flag that was held upside down by the Chinese child at the Olympics, it is meant to signify "China has arrived!"