At first I thought they were flares to mark locations to bomb, but that doesn't really make sense - if you fly a plane to drop flares, you might as well just drop bombs

Actually, pathfinder bombers often dropped flares instead of bombs. Pathfinder bombers were sent ahead of the main force to mark the target, and flares allowed landmarks to become visible, thus increasing the following bomber's accuracy. This was more often done in the European theater by the RAF.

In the Pacific, the switchover to firebombing came after disappointing results from conventional bombing. With the Japanese practice of utilizing many small factories scattered throughout their cities combined with the flammable nature of those cities, firebombing was a logical (if terrifying) conclusion to reach. The bombers switched from high altitude conventional bombs to incredible numbers of firebombs (as they were smaller and lighter than conventional bombs) dropped from low altitude. Each firebomb was designed to be sufficient to ignite a structure. The resulting conflagrations in Tokyo and other Japanese cities were devastating. Emergency services were overwhelmed, citizens were surrounded by walls of flames, and acres of cities were completely incinerated. The fires were so intense that late-arriving bombers were tossed violently upwards by the updrafts.

For a recent look at the campaign, Edwin P. Hoyt's Inferno: The Fire Bombing of Japan, March 9 - August 15, 1945 is very good. The more recent Whirlwind: The Air War Against Japan, 1942-1945 by Barrett Tillman also covers the issue quite well.

This is a cartoon so don't take it as a fact. That said, this represents the firebombing that had been already going on for years during World War II. For example, the modern Tokyo metropolitan area has 14 million people. 1945 Tokyo had 6.5 million people. With wartime precautions, it is entirely believable that the U.S. could burn down 51% of a city and only kill 2-5% of the population. This is thanks to wartime evacuation procedures and the fact that Allied firebombing doctrine called for incendiaries to be dropped over a restricted geographical area over a short time, with the goal of overwhelming firefighters in a particular district and creating an uncontrollable fire that would spread across the city. This meant that there would be a very high death toll in the immediate vicinity of the drop, but that 92%-98% of the people in the path of destruction could escape.

For the firebombing of Japanese cities, the United States Army Air Forces marked a relatively small area and dropped its incendiaries there. This was meant to create a firestorm or a wind driven conflagration that would destroy much of a city.