I mostly use Flask to create handy status dashboards and debugging tools for servers that do other things. It's a nice use pattern: you want to expose some of the internals of a server over a firewalled-off port, so you whip up a few HTTP endpoints in Flask, start an HTTP server in a background thread, and declare victory. It's quick and easy, and can save huge amounts of time later when you're trying to figure out why something isn't quite working.

There are other reasons to avoid GAE -- price, datastore latency, lack of flexibility -- but my main one is that GAE just doesn't apply to most of the things I use Flask for.