I've only seen these a handful of places and have been looking for a set myself for years. While I'm not entirely well-read on the subject, I have checked out a scholarly source, wikipedia, and am here to report on the reasons you should hang prayer flags in your own yard.
The flags originated from the Buddhist tradition, perhaps in India. Although the original flags were perhaps used in battle, they have now spread throughout the world as a symbol of peace.
The five colors represent the five elements. Blue/sky/space, white/air/wind, red/fire, green/water, yellow/earth.
The center of the flags usually features a "strong horse" carrying jewels. The horse, or "Ta," is the symbol of speed and the transformation of bad fortune to good fortune. (This I find particularly interesting as my fortune has this year turned the corner.)
The Tibetans believe that the flags do not carry prayers to the gods, rather that the wind blows the prayers from the flags and spreads their good will and compassion throughout the entire universe.
The prayers of the flag become a permanent part of the universe as the flag colors fade from exposure to the elements. The Tibetans hang new flags alongside the old, welcoming life's changes, and acknowledging that all beings are part of a greater circle.
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