I think lights are usually used to signal that a driver is being aggressive and pushing hard. I personally do it just so people know I am there and I want to pass them, although the button I used was easy to press so I kept on accidently using them. Oh and S14 another reason for using them is to irritate the drivers infront of you, or make them look in their mirrors more.
Blinking or turning the lights on to intimidate people you're racing... Fake pass attempts and generally being at someone's bottom to force him into a mistake is obviously fine...
I wouldn't flash the lights to distract someone, but I would have them on so I stand out more in their mirrors. As far as I know that has never been a problem, you see it all the time in touring car racing.