The Mexico Flag and its emblem have an old and very interesting story about what it depicts.The holiday; Diá de la Bandera or Mexican Flag Day is February 24.

While the Flag of the Estados Unidos de Mexico ( that’s right; United States of Mexico) wasn’t established officially in its form until 1821, it depicts a story of Mexico culture from the ancient peoples known as the Aztecs.

Supposedly in 1325 long before most of North America was “discovered” the Aztecs were populating the area known as Mexico today with a relatively great civilization.

The story goes that the Aztecs received a vision or a sign from “Huitzilopochtli” through one of their many “gods” that told them they would know where to build their central city or “zocólalo”, the empire of Tenochtitlan” ("Place of the Prickly Pear Cactus") when they saw what is today depicted on the Mexican Flag..

They were told that when they saw a [Mexican] Eagle perched on a Nopal cactus with a serpent (rattle snake) in its talon, located on an island, this is where they should begin to build their permanent city. They supposedly did encounter this on an island in the middle of a lake (Lake Anáhuac) now known today as México City. See Mexico map.

The only problem with building there was there was not much dry land so the Aztecs created balsas or basically rafts made of reeds and soil where they would live and grow their foods. Eventually through the many years they used and diverted the water making more and more “land” to live on.

This is where Mexico City currently stands today. This is also why through the many years that as the Aztecs and eventually the Spaniards and now Mexicans developed Mexico City, it is sinking into the earth.

It is said that under Mexico City today are many levels of civilizations. For example many of the Catholic cathedrals created by the Spaniards are actually on top of invisible pyramids that were built by the Aztec people.

The green-white-red tricolor was first seen in 1821 and was know as the “Sierra”. The name was given to it by the Indians of the sierra of Veracruz and Puebla.

It was not officially adopted by Mexico until April 14th, 1823. As for the colors there seems to be some disaccord. As you can see by the following examples.

Once source claims:

Green is for hope and victory.
White is for the purity of our ideals. 
Red is for the blood our national heroes shed.

Another source says:

Green is for Independence
White for Roman Catholicism
Red for Union

There have been several revisions to the flag with the last being in 1995 with the passing of the modifications of the Flag law.

The decree issued on May 9, 1995, modifies the articles 2, 18, and 55 ... of the last Flag Law issued in DOF on February 9, 1991, states how the Coat of arms should be reproduced on the reverse side: From article 2 of the mentioned decree:

The National Coat of Arms is featured by a Mexican eagle exposing its left profile, the upper part of the wings in a level higher than plume and slightly displayed in a battle attitude; with the sustentation plumage downwards touching to the tail whose feathers are arranged in a natural fan. It puts its left grasp on a bloomed that is born in a rock that emerges from a lake. It is grasping with the right grasp and the beak, in the process of eating a curved serpent, so that it harmonizes with the whole. Several "pencas" of the grow to the sides. Two branches, one of “Encino” to the front of the eagle and another one of laurel opposed, form a lower semicircle and they are united by a ribbon divided into three strips that, when the National Coat of Arms is represented in natural colors, correspond to those of the National flag.

When the National Shield reproduces in the reverse side of the National Flag, the Mexican Eagle will appear standing in its right grasp, holding with the left one and the beak the curved serpent.

Another important feature of this decree is the addition of the article 54-Bis talks about the destruction of a flag: >From article 54-Bis of the mentioned decree:

When it is required to destroy some copy of the National flag, it will be done by means of the incineration, in a respectful and solemn act, in accordance with the specifications that the corresponding regulation determines.

Source:

Decree of reform for the articles 2o, 18 & 55, and in addition article 54 Bis…of the law of the shield, the Mexico Flag, and Mexican National Hymns.

Issued in DOF on May 9, 1995.

The Mexico Flag is most prominently flown on “Dias de Bandera” which is the Flag Day of Mexico, February 24th and also on México’s Independence Day, the 16th of September, known as El Grito or the shout for independence.