When should the Spam flag be used?
When you think something is Spam.
It's a judgement call. Spam flags are relevant when someone posts a wildly irrelevant question or answer promoting a product to the site, or an answer that seems relevant to the question on the surface, but contains unrelated product links or information. For example on the latter:
Note that a successful spam vote is a serious mark against an account and severely limits what that account can do.
The question you flagged was a little promotional, but ultimately it was internal to Stack Exchange. It discusses an SE network feature - creating a new Stack Exchange site based on a sub-section of gaming - something we've covered before on meta with regards to Minecraft: When does it become necessary to create a new community for a specific game?.
Even if your flag was declined, the flag alerted the mods to the post and appropriate actions were taken (migration to meta and deletion off the main site).
Also note: not all answers that contain product or purchase links are spam. If the product is a relevant solution to the question at hand and the author discloses their affiliation (or lack thereof), it's ok. As an example, here's an answer I provided that links to a site to purchase replacement parts (and disclosed my lack of affiliation).