Yep you can animate frame by frame or using tweens or (most likely) both.
A few tips for animating in Flash that may not be obvious if you haven't used it before; if you want to animate loops (such as a blinking light in a background or a walk cycle) then you can contain them inside their own timeline using a Graphic or a MovieClip.
Graphic objects run along their timeline in conjunction with their parent timeline, so they stop when it stops. This is good for situations like walking across a scene because you only have to animate the walk cycle once.
MovieClip timelines are independent and will continue on their merry way regardless of what's happening on the main timeline. These are particularly good for background items that need to loop infinitely such as lightning flashes, clouds.
However, if you haven't used Flash for animation before then one thing to be aware of is that if you do use nested timelines (e.g. animated movieclips inside others), it's very difficult to export as video. The only option is as a MOV and if there's a lot going on in your scene or if it's high resolution then you need some serious hardware to do it.
So if your final output is intended as video I'd recommend doing some tests with your output. It's not very nice to find out you can't export after you've done all the work
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