He says it's to honor much of the revolutionary spirit of Simon Bolivar. Chavez is no Bolivar, and in fact, embodies much that Bolivar fought against. Many consider this to be just another political stunt.
Features of the flag:
The horse that had been galloping right now gallops left. I don't think that's coincidental.
A machete symbolizing labor. Yeah, I know how well Chavez and his brand of socialism (actually a dictatorship, with much of the laborer's wages going into the pockets of the governing elite) honors the fruit of his workers. The Bolivar now stands at 2144 per U.S. Dollar. It was 506 when I visited in 1998. It passed the 1000 mark in 2002, and the 2000 mark in 2003 (source: X-rates.com). It seems to have "stabilized," but that also seemed to be the case every few months since 2001, with the Bolivar jumping sharply between plateaus.
Methinks the money spent on this little political boondoggle would have been better spent on economic development. What is it about oil-rich dictatorships that causes them to piss away their resources?