Upon zoning into the Undercity after using the portal in Shattrath, I was surprised to find my toon with a prevalent flag on his back, just as in an organized Arena game. I also noticed an "Arena Preperation" buff on my toon, which reduces the cost of spells and abilities by 100%. We know Bliz had planned on implementing this buff upon entering a BG, Arena, or upon resurrection, but I did not expect it to make an appearance while running around the UC. And it wasn't expiring either, which really stumped me.
After asking around, I was told that the new buff replaced the "Honorless Target" buff and that it and the flags would remain in the Live realm. However, after relogging within the UC and finding that my target had both the Arena buff AND the Honorless Target buff, I'm beginning to question the validity of what I was told. And after checking the WoW Forums for more legit details, it does appear that the buff and flag showing up outside a PvP context is indeed a bug. So thankfully, when 2.3 goes live, there won't be flags stuck onto the back of every toon you see. How annoying would that have been!