Well from several accounts that I've read, Skynyrd embraced the "rebel" flag for just that reason. Rock n roll was considered to be rebellious music back in the 60s and 70s. Using the rebel flag pays homage to their Southern roots and is meant to convey the general rebellion of rock in that era. I think that it could have feasibly done both. Seeing Skynyrd utilize it could have made some people think that it was socially acceptable, and fans of the band may have thought it was just cool to show it off. I feel like to each person it has it's own meaning.

Some people today use the confederate flag as a means of iconic rebellion and a means of holding on to their southern roots. Granted, most northerners, see this as "holy shit, we've got klan members on our hands." That's not necessarily true. The flag can just represent rebellion and a tribute to the "simpler" Southern ways.

I guess, in short, it depends on the context. I'd say that the safest bet is that it represents rebellion in general. Depending on where you are and where it's flying, you can make whatever argument you'd like.

Klan rally= racism, roots of slavery and oppression
In the North= you're a redneck
Skynyrd concert= FREE BIRD!