To be flustered is to lose your cool. When you're flustered, you're embarrassed, agitated, or just confused.
If your pants fell down in the middle of class while you were giving a presentation, you'd probably be flustered: highly embarrassed, out of breath, and a little freaked out. It's hard to concentrate when you're flustered — it's a distracting state of mind. Being flustered isn't quite as bad as being panicked, but it's close. People can also get flustered by good things, like if someone you had a crush on kissed you.