Charles,

This is an Military Urban Legend. The razor would have been used to cut the flag up and the matches to burn the flag to keep it from being captured and exploited by the enemy. However, these items in reality do not exist. Especially some versions that have a full up weapon being present. All it would take is some drunk soldier/sailor/airman/Marine to get ahold of the thing and hurt themselves or someone else and another blotter incident would take place.

http://www.snopes.com/military/flagball.htm

I hope this helps.

Respectfully,

Gerald D. Hodge, Jr
Major, U.S. Army