Clint Goss just posted an excellent article on how to do a binding wrap on a flute to help reduce the possibility of cracking. This is especially important for cane and bamboo flutes.
In my opinion, it's not really necessary on modern wood flutes (like cedar or walnut, etc) except as decoration. However, Clint does mention in the article that some wooden flutes may crack if the humidity is low enough. In Northern California, we have sufficient humidity (except maybe in the higher altitudes of the Sierra's). Anyhow, use your own judgement here. I have never had any my wooden flutes crack, while living in Northern California, in the 12 years that I have been playing.
You will find this a great step by step article, if you have never attempted this wrap before. I would suggest trying it on a scrap dowel a few times, until you get the technique down, before you attempt on a good flute.
Here's the article: http://www.clintgoss.com/binding.html