It gives a stacking 8% boost to your army's defense rating, when you are attacked. It has the same defense bonus as 2 Watchfires and also requires the same amount of space.
The Ritual Flame can be upgraded by Ritual Flame Upgrade Kit item. To upgrade the Ritual Flame, use the Ritual Flame Upgrade item on the Ritual Flame that is already situated in your city. Its upgraded version will then be placed directly on the same spot in your city and the production timer will not be reset. Note that the upgraded building will be from your current era, even if the old one was from one of the earlier ages.