Flash completely ignores the z-index and goes always on top of the page. Why is that bad? Imagine you want a hover menu to go above it -Big problem.
In many forums, people post that this can be taken care of by setting wmode=transparent. However, this does not work on all browsers.
PS: Even big companies do not seem to have figured this problem out. Look at the following page with different browsers: http://www.bmw.com/com/en/insights/technology/efficientdynamics/phase_1/introduction.html