The science is settled. Active recall (retrieving information from memory) beats passive review (re-reading, highlighting) by a wide margin. Flashcards force active recall every time you flip a card.
Layer spaced repetition on top — an algorithm that times your reviews based on how well you remembered each card — and you get the highest-leverage study technique in cognitive science. Anki, Quizlet, and QuickCards all implement this in some form.
Caveat: flashcards build recall, not understanding. Pair them with practice problems for skill-based subjects (math, physics) or reading practice for verbal-heavy exams (LSAT, GRE verbal).