Quite true, I'm from the UK and it definitely used to be the case that blinking rear lights were against the law and for many years I obeyed. However, noticing that flashing lights were only carried by cyclists and that it made it easy for other road users to identify us, I decided to start flashing, so to speak. Amazingly, it appears that UK law was ammended in October 2005 to allow cyclists to carry front and rear flashing lights. I only have one source for this information but if anyone's feeling strong
http://www.opsi.gov.uk/si/si2005/20052559.htm
Well done the government, and if I've misinterpreted this please let me know.