That has nothing to do with downloading, its a plugin that animates the presentation of the image.

It could have something to do with downloading...

If the Jpeg is not optimized and is large in size (or you are on a slow connection) it can appear as you describe. It's not a design feature or an optional way of saving it.

Using PSCS, how do you make a web image download gradually? I don't mean changing from blurry to sharp (progressive), but rather appearing down the screen like a flag unrolling, as you often see on photo sites.

In Photoshop Elements (and, I presume PSCS), "Save for Web" has a "Progressive" check box option, and similarly in the JPEG options for a regular "save as", so you can select which format you want.

But, as pointed out, you can't really use it as an intentional effect since the speed of "unrolling" will depend on the size of the file versus the viewer's connection speed.