With CNAME flattening, Cloudflare finds the IP address that a CNAME points to. This process could involve a single lookup or multiple (if your CNAME points to another CNAME). Cloudflare then returns the final IP address instead of a CNAME record, helping DNS queries resolve up to 30% faster.
CNAME flattening happens by default in some cases, as explained in its Setup page
If a CNAME target is being used to verify a domain for a third-party service, enabling the Flatten all CNAMEs setting may cause that functionality to work incorrectly since the CNAME record itself will not be returned directly.