Craigslist ads appear and disappear all the time. These are free ads which get deleted if the system gets enough 'flags' asking for it to be removed. The flagging system is anonymous and (debateably) subject to massive abuse (as are anonymous free ads in the first place, which is the rationale for the community policing model Craigslist operates under).
For your specific case, the fact that her ad was flagged off means pretty much nothing. As noted above, an ad in casuals violates Clist posting policy. Enforcement varies community to community, quite possibly having to do with the local availability of people with a God complex and nothing better to do. The dogma is that ads are removed when a certain number of individual flags are received - on Clist, you can pretty much depend that the ad was removed because certain people were offended by its content, NOT because they had a negative (or ANY) interaction with her.
Google is your friend. Search 'Craigslist Flagging'. You will find oodles of entries, some passionately espousing the party line that Craigslist is a Utopian online marketplace self-regulated by its users. Some (more than a few) describing fairly systematic mob rule, bullying and vigilanteeism - especially in the personals (accompanied by dollops of self-righteousness) but quite regularly in the services and forsale areas. (Hypothetical - if you had access to may-or-may not exist flagging software that could generate hundreds of flags from spoofed e-mail addresses, would it not be tempting to target your competition?)