Wikipedia says, “The Giostra della Quintana was a historical jousting tournament in Foligno, central Italy. It was revived as a modern festival in 1946. The tournament event takes place in June (1st Challenge) during a Saturday night and September (the counter-challenge) the 2nd or 3rd Sunday of September, and is proceeded each time by a festival with a 17th-century costumed parade.”
The festival must have been at or around the time when we were there. Explains all the flags and the decorations.