This version of the Confederate flag (an elongated version of the battle flag) was used mostly by the Confederate naval forces. The original square version served as the battle flag and also appeared on later versions of the CSA national flag. But why 13 stars?

The Confederate States of America was a nation made up of 11 states:

South Carolina (December 20, 1860)
Mississippi (January 9, 1861)
Florida (January 10, 1861)
Alabama (January 11, 1861)
Georgia (January 19, 1861)
Louisiana (January 26, 1861)
Texas (February 1, 1861)
Virginia (April 17, 1861)
Arkansas (May 6, 1861)
Tennessee (May 7, 1861)
North Carolina (May 21, 1861)

The two other stars represented Kentucky and Missouri. While those two states did not officially secede from the Union, they did everything but join the Confederacy. Both were heavily populated with Rebel sympathizers, both were “slave states,” and both had much more in common with the South than the North.

Truth be told, whoever was in charge of the CSA flag committee had no idea how to make a flag. Early versions of the Stars and Bars were so similar to the United States flag that soldiers became confused on the battlefields. Later CSA flags were white with the battle flag in the canton, and when the wind wasn’t blowing, they looked an awful lot like a plain white “surrender” flag. Still later versions added a red bar to the outer edge of the flag, but by then, the war had nearly reached its conclusion.