This flag is set to #$02 as soon as the Yoshi wings animation (#$08 of $7E:0071) brings you above the screen ($7E:0080 = #$FFC0), which means you will be heading for level C8 or 1C8.
As a byproduct, Yoshi will have wings in that level, and you can't die from falling into the depths. Moreover, as you enter the level, Yoshi will always be blue. It's also the only way you can "die" with Yoshi without losing him on the overworld.
