Thank you for the simple explanation, I have been trying to wrap my head around the wording and now I think I understand. If only he downvotes and his SP is 1500, and then I upvote myself to do away with his downvote and my SP is 1505, then he did nothing but waste a downvote on me? Do I have that right? only those two votes on a post. Just an example. But that would explain how a few people negated his down vote on me 3+ months ago.
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No worries :) Yeah, basically, since you have more SP, your reputation would not be affected. However, he would effectively be canceling out most of your SP with his flag, so while your upvote will keep you from losing reputation, you won't get hardly any monetary value out of it (1505 SP - 1500 SP = effectively a 5 SP upvote), or at least that's the theory. I may be off on the money bit, but I'm confident in the reputation part.