umm... yeah. it could be flirting. it depends on the type of girl. if she's always flirtatious with other guys and such, than she's probably just flirting with you.
but if it's a girl you share your feelings with, aka: a girlfriend, it's quite possible she's feeling a little insecure compared to all the 'prettier' girls out there. you should tell her the truth of course, but if it's that the other girl is prettier, you should probably ease it down. or not say it at all ^_^. avoiding the subject!
but if your girl is prettier, then make sure you say it with incredible emphasis! it'll make them feel a lot better and it'll lower the chances they'll ask questions like "am i fat?" or "am i pretty?"
hope that helps!