The Gold Star Banner designates a family member lost in battle. It is the same as the Blue Star Banner, but with a gold star placed over the blue star, hence the blue border on the gold star.
The Gold Star represents sacrifice to the cause of liberty and freedom.
President Wilson became part of this history when in 1918 he approved a suggestion made by the Women's Committee of the Council of National Defenses that mothers who had lost a child serving in the war to wear a gold gilt star on the customary black mourning arm band.
This led to the practice to cover the blue star with a gold star on the Service flag to indicate that the service member has died or been killed.
During World War II, the practice of displaying the Service flag became much more widespread. Virtually every home and organization displayed banners to indicate the number of members of the family or organization serving in the Armed Forces, and again, covered those blue stars with a gold star to represent each member that died.
The most famous of these flags during WWII was that of the Sullivans of Waterloo, Iowa, who lost all five of their sons when their ship was sunk.
American Gold Star Mothers http://gazingattheflag.blogspot.com/2007/05/american-gold-star-mothers.html