When opening an unread message for reading it’ll automatically be marked as read. This can also be done directly in the list by clicking the unread star in front of the subject. Click it again to mark the message as unread.
If the flag column is visible (Change message list columns) you can flag/unflag a message by clicking on the flag column of the message row. Furthermore there’s the Mark menu in the toolbar that allows you to flag all selected messages with one click.
