The basic concept of Flagging (or Reporting) is simple. You are doing IMVU a favor, unrewarded mind you, for doing their job of self-policing the neighborhood.
To flag a user, one has to know to click on their Avatar name or avatar, and bring up their card, and hit the Flag icon. From there you can report to IMVU a chat log from inside the room. This is the only accepted means by IMVU to report a user. Tattle-tailing after the fact in Help or Forums is useless. Screen prints of offending users can be photoshopped and also not accepted by IMVU.
Due note that when you report a user / room log, it sends the entire chat buffer to IMVU, and you may also incriminate yourself from an earlier conversation!
There ARE ways of flagging items in a room that are hidden from a room inventory (found by right mouse clicking in a room to pull a room inventory).
This is a very useful website tool to get a room product inventory:
To flag an item, you will need its unique product number. This IMVU forums thread tells you how to find the product number of obscene items in outfits in rooms, even if the outfit is hidden:
When someone has reported you, and IMVU reviews the chat log, you will get the following in your Inbox:
An IMVU user has complained that you were abusive during a 3D chat. We have reviewed the conversation log that they sent us and found it to be in breach of the IMVU terms of service. Please read the TOS for guidance as to what is and is not appropriate on IMVU
This is your 79th warning
You will never know who you said what to. For all intents and purposes, it is best to sit in a room and sing Kum By Ya according to their almighty TOS.