They don't change with the general; it's strictly based on the unit. They get extra flags with experience and armor/weapon upgrades. A 3-gold unit with the weapon upgrade and 3 armor upgrades will have little flags over the entire front rank. Basically they get one flag for each in most cases.
The big flag is also different depending upon the unit. Missile infantry units have a triangular banner, cavalry units have a long banner like a modern flag, and melee infantry units banners are rectangular but taller than they are wide, more like the back banners samurai would carry.
Edit- Noticed tonight that castle melee infantry has a different banner than city melee infantry. The samurai banner is for castle infantry. City melee infantry looks like a normal flag with 3 points on the end of it.
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