The flag in question, white bearing a pine tree and the motto "Appeal to Heaven," is commonly known (to vexillologists) as the Flag of Washington's Cruisers. In 1775, while reorganizing the army, Washington okayed a plan to launch several small boats armed with cannon into Boston Harbor to attempt to harrass the British fleet that was anchored there in great numbers. The idea of the Flag was stated in a letter from Washington's secretary, Col. Josaeph Reed, to Cols. Glover of Marblehead and Moylan dated 20 October 1775 and is basically the jack form of the New England flag with the addition of the motto "Appeal to Heaven" which is taken from the closing paragraph of the address of the Provincial Congress of Massachusetts shortly after the Battle of Lexington, "Appealing to Heaven for the justice of our cause, we determine to die or be free.".
It was stated in Reed's letter that this was the flag of the floating batteries already launched. There is no sketch with the original letter but there are several very different designs pictured in a number of sources. The Cruisers were not terribly effective in Boston but they did signal the beginnings of the Massachusetts Privateers who flew the same flag and were very successful. Massachusetts adopted the flag in April 1776.
It is believed that in 1777, when the US Navy was formed and was divided into two squadrons, the Northern Squadron flew this flag while the Southern Squadron flew 13 red and white stripes with a rattlesnake stretched across the middle and the motto "Dont Tread Upon Me." This flag remained the official Naval Flag of Massachusetts until 1971 when they dropped the motto and reverted to their original Naval Flag.
Maine's Naval Flag is also white with a green pine tree and the state name and motto and an anchor, all in blue. It is derived from this flag.