Original Flag

The original flag of the Netherlands actually was orange, white and blue. During celebrations it is still very common to add an orange pennon to the flag. (Example image here.)

18th century

The colour on top was a heavily disputed political issue during the 18th century. The opponents of Stadtholder William V, Prince of Orange, advocated the red-white-blue tricolor. This group was known as the Patriots. His supporters held fast to the orange-white-blue design.

In the years after the French Revolution the House of Orange was forced to flee from the Low Countries. During this French Period (1795-1813) the orange was replaced with red. The legal change was made early 1796, when the States-General issued the following decree:

Dat voortaan en in het toekomende de Nationaale Vlag van deezen Staat zal zyn de gewoone en altoos in gebruik geweest zynde Bataafsche of zoogenaamde Hollandsche Vlag, bestaande in drie evenwydige en horizontaale Banden van gelyke breedte, en van welken de bovenste rood, de middenste wit, of ongekleurd, en de benedenste blauw gekleurd is

I would translate this as follows:

That henceforth and from now on (sic) the National Flag of this State will be the common and always having been used Batavian or so-called Hollandic flag, consisting of three parallel and horizontal stripes of equal width, and of which the top one red, the middle one white or uncoloured, and the bottom one is coloured blue

They're basically claiming that the red-white-blue design has always been used for the Netherlands.

19th century

When Napoleon was first defeated and the Netherlands eventually became a kingdom under the House of Orange this change was not undone. People celebrated using both versions of the flag. During the celebrations on November 24th of 1813 the royal palace in Amsterdam actually flew the red-white-blue tricolor, although it adds a separate band of orange. This tradition remains.

William I (son of the last Stadtholder) does not revert the decision to change the flag. This would remain controversial however. When the Kingdom of the Netherlands celebrates 50 years of existence in 1865 the public debate about the flag is rekindled.

20th century

In 1937 a new royal decree confirms the red-white-blue design. A law to the same effect is never discussed in parliament. During the German Occupation (1940-1945) of the Second World War the red-white-blue flag is banned from display. Nazi-sympathizers were supporting the orange-white-blue flag as a nationalistic symbol. As far as I know after the war the red-white-blue design was never controversial again.

It used to be http://nl.wikipedia.org/wiki/Prinsenvlag

But during the French occupation between 1795 and 1813 it was changed to red because the House of Orange was on the English side and the French didn't want a reference to house of Orange.

In the 1920's end 1930's it was considered to move back from red to orange. However, only the Dutch naziparty NSB was completely supportive on this. Because the then queen Wilhelmina didn’t like the NSB she’s blocked this. Since then the version with orange instead of red is associated with (neo-)nazis.

In situations that are asociated with the Royal house, like queensday, a orange pennant is added to the flag.