This is the 12036th most frequent Russian word.
знаменами
"Знаменами" means "banners" or "flags" (instrumental plural form).
The word 'знаменами' here is used in the instrumental case plural form to describe the manner or accompaniment of the action 'шли'. It denotes physical objects, banners, carried by people.
Люди шли по улице с большими знаменами.
People walked along the street with large banners.
In this sentence, 'знаменами' is again in the instrumental case plural form, used to indicate the items used for decoration, namely banners from different countries.
Площадь была украшена знаменами всех стран мира.
The square was decorated with banners of all the countries of the world.
Here, 'знаменами' describes the way patriotism is symbolized, using the symbolic representation of banners in the instrumental form.