When a girl flirts with me, it often takes me a couple of minutes to actually realize what is happening. There are two separate scenarios.
If the girl is looks really good (7 or higher), I dismiss her flirting as a prank. I don't consider myself attractive, so there's no reason for a hot girl to be flirting me in the first place. If she seems nice enough, I make small talk as a courtesy, but always remain prepared for the possibility of a prank or a practical joke. This tactic never let me down.
If the girl is average-looking (4 to 6), I get very flattered. My looks are about in that range, so if a girl of similar looks is flirting with me, the possibility of attraction is very real. Depending on whether I feel "in the zone" or not, I either make a conversation with her or just freeze up trying to come up with something to say.
If the girl is not so attractive (3 or below), I'm struck with a moral dilemma. On one hand, there's very little competition, and I won't have much trouble getting a date with her. However, it wouldn't be fair to her if we started dating when I didn't find her attractive. The dilemma is worse when the girl is touching me, as opposed to flirting verbally.