The b flag, or Boss Scaling, makes bosses more difficult if they hold Key Items that result in progression.

As of 3.1.1, how this works is that different key items are assigned a rank: the Chrono Trigger, Clone, and Ruby Knife are assigned 3, and the Blade, Hilt, and Dreamstone are assigned 2. Bosses that hold those items directly (with some exceptions, noted later) are scaled to match that rank, with higher ranks meaning higher stats. While some Characters are required for Go Modes, they don't influence the rankings.

If a ranked boss is restricted by another key item, such as a key item at Giant's Claw being restricted by the Toma's Pop, which itself is the reward after the Sunken Desert, then that second item (and corresponding boss) is given a rank one lower than the first boss. So, imagining the Clone is in Giant's Claw and the Toma's Pop comes from the Sunken Desert, then (if Boss Randomization isn't on) Rust Tyrano would be given rank 3, and Retinite would be given rank 2.

There are a few exceptions:

1. If a ranked key item is in the future, then every boss in the future will have that rank. If there are multiple, the highest rank is given to them all. Dragon Tank is given a rank one lower.
2. If a ranked key item is given by Melchior as part of the Sun Stone quest, then the Gate Key and Pendant are ranked as usual (one lower than the rank of whatever Melchior has), and Dragon Tank one lower. However, the boss in the King's Trial quest (Yakra XIII normally) is treated as the relevant boss for the quest and is given the rank of the Melchior item. Dragon Tank's rank can end up lowered by this, and if the Prism Shard is later added at a lower rank, then the King's Trial boss can also be further reduced.
3. Three “no requirement” bosses are never ranked, even if they hold a ranked key item: Heckran, Masa & Mune, and Zombor.

While Boss Scaling and Boss Randomization (ro flag) can be simultaneously enabled, it is not recommended because the results are non-intuitive in versions up to 3.1.1. The randomizer applies Boss Scaling first, and then applies the modifications from Boss Randomization afterwards. This can result in scaled bosses in locations that do not hold progression.

As an example, suppose that the Chrono Trigger is placed in the Reptite Lair. The Boss Scaling flag will grant Nizbel greatly improved stats since his normal location now holds a rank 3 item. However, after this improvement, Boss Randomization has the chance to move Nizbel to a new location. For the sake of the example, let's say he is moved to the Cathedral. As outlined on the Boss Randomization page, Nizbel will be given Yakra's HP (plus a random factor), and his stats will be scaled down a bit due to the cathedral being a low tier spot. However, the scaling will be done from the starting point of Nizbel's greatly improved stats from Boss Scaling. The end result is a Nizbel with normal (for Boss Randomization) hp but significantly higher than normal stats.