I have a small block at the masthead. Attached to that is a 1/8 line that runs along the backstay to a shroud cleat. The cleat is mounted pretty high so that it's most comfortable for me to stand on a cockpit seat or on the transom to raise the flag. This seemed best just to keep things away from people while sailing. On the line are a couple of stainless clips, tied to the line to accommodate the size of our ensign. Those clips attach to the ensign AND the backstay so that they run up the stay, which keeps the line (and the flag) on the backstay. I used this arrangement because my mainsail is pretty close to the backstay and I wanted to keep the line from fouling on the sail. Sailcare sells kits for this, with the little clips (which I have not seen anywhere else) for about half what you'd pay for a Johnson flag halyard kit.
It works really well; we hoist the ensign up about 2/3-3/4 up the height of the backstay. Aside from being technically correct and (I think) looking very yachtsman like, the best thing about having a flag on the backstay is that it is a great wind indicator. We use it more often than the wind vane at the masthead.
One caution; we don't raise anything to the top out of fear that it may foul on a halyard or something else up there where things get tight. My kids really want to fly a big streamer up there, but I worry it would result in a tangled mess.