When Friedman says "The world is flat" he is trying to convey his thinking and research of how the world is reshaping itself. Although the world is not physically reshaping, we can talk to people in Japan like they were siting next to us, we can work for corporations that are on the other side of the world. He is trying to show us with one catchy phrase what is happening to our way of life; for centuries your ability of getting a high paying job depended on where you lived, now you can get a high paying job anywhere in the world. As the world is flatting out, people who couldn't get jobs before are easily getting them now. For example, in Bangalore, Friedman shows that employees are performing jobs for US companies cheaper than the equivalent American would settle for.
We as Americans no longer have the advantage of being on top of a mountain with our high paying jobs and extremely well educated workers, looking down upon the uneducated people of the world who have to get a minimum wage job before they finish school. Now the mountains have been leveled and the valleys filled and now as we look at Japan at the same level as us competing for the same jobs. As Friedman puts it "The Playing Field Is Set" and now Americans will have to be untouchables, or fight for jobs with the additional millions of eager workers.