As the story goes, the wicker baskets came about after a trip to England. After seeing a shepherd with a staff and atop the staff was a wicker basket containing food , in there to stop the animals getting to it! So the merion course designer (hugh wilson)thought that would look good on flagsticks so he included them in his design!
As has been said they are meant to stop the golfer reading the wind on the green(which i thought was the whole point of a flag)and they can be seen in any wind!
Apparently if you win the open you are given a wicker basket to keep!