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jailbreaking used to let you use an app called frash, but it's outdated and doesn't do much good now. I suspect there's a better option but I'm not sure what it is offhand (LUKE: good suggestion for a guide or an addition to the Great Cydia Apps list!)
For now, the skyfire browser in the app store (no jailbreak needed) does an okay job running flash videos, but you can't play "dynamic" flash stuff, e.g. newgrounds.com, flash games, homestarrunner, etc.