The Indigo Flower is part of the RedPower2 Mod. They can be broken and planted similar to the Dandelion and Rose. However, unlike those flowers, it cannot be used in Cross Breeding.
The Indigo Flower allows for the crafting of Indigo Dye, in the same manner as Rose Red and Dandelion Yellow. Indigo Dye can be used as a cheaper alternative to Lapis Lazuli for blue dying purposes. It can be found in pretty much any biome.