A Google Groups thread requests clear guidelines from Google about acceptable hidden flash content. In some cases, people are very adamant about focusing on dynamic content but don't want to sacrifice indexability. He employed a tactic that displayed content in the Flex application where a mixture of PHP and dynamic deep linking is utilized, but got deindexed as a result. He thinks it's a penalty.
Others suggest that it isn't -- it's a technical limitation because spiders cannot understand everything behind Flash content. The solution is to provide an equivalent spiderable HTML page.
Most disagree that he was penalized -- unless his tactics were spammy or questionable. In fact, Google's Bergy comes in and clarifies.
Using Flash is not in itself a violation of the Webmaster Guidelines, and we do not penalize sites simply for using Flash.
Further, Bergy clarifies the difficulty of Flash versus textual content.
I know that the tendency to build sites around Flash isn't a new trend, and we both understand that Flash is very different from HTML; HTML was designed to describe static text and images, whereas Flash was designed to describe vector-based graphics with interactive multimedia content. However, keyword indexation, the process that lets search engines be so darn fast, only makes sense for textual content.
I think this goes to show that the important thing is that if your site is detailed in Flash, you better have the same amount of detail in HTML content so that the spiders can get to your page -- and index it -- without any problems.
Forum discussion continues at Google Groups.