Final answer:
The 'Divers in the Water' indication is communicated by a blue and white checkered flag, known as the Alpha flag, signaling nearby vessels to proceed with caution.
Step-by-step explanation:
The flag that indicates "Divers in the Water" is a blue and white checkered flag. This flag, also known as the 'Alpha' or 'Alfa' flag, is used internationally to denote that there is a diver below and that boats should keep well clear at slow speed. It's part of the International Code of Signals used by ships at sea to communicate important messages regarding their activities or situations.