In the aviation world, its means that the wind is not blowing straight down the runway. Normally, you takeoff and land with the nose of the aircraft pointed into the wind (upwind).
But we don't live in an ideal world, so the wind is not always blowing along with the runway centerline. When the wind is blowing from an angle, it is called crosswind.
Crosswind is something every pilot will encounter, real or simulation. On airports with runways in various directions, the ATC will use a runway that is heading into the wind if possible. But on many airports, there is only one runway, or two runways parallel to each other. On such airports, crosswind conditions are not unusual. In FS2004 and FSX you can setup a crosswind situation whenever you want to. But when you're flying with real world weather (with 15 min updates), you'll encounter crosswind, eventually. Note that you need a joystick with rudder control or rudder pedals in order to be able to takeoff or land in crosswind conditions. If you don't have either one, then forget about crosswind, because it is nearly impossible with the keyboard.
Crosswind during takeoff
A takeoff with crosswind requires a longer roll before liftoff since there is aerodynamic drag due to the deflection of the control surfaces. This is important to realize, especially if the runway length is limited. During takeoff, the yoke is held into the wind to hold the up-wind wheel on the ground. On the same time, the rudder is used to keep the aircraft aligned with the runway centerline. Due to the friction of the tires on the runway with the weight of the aircraft on those wheels, this shouldn't be a problem. But as soon as the aircraft breaks ground, the crosswind will try to turn the airplane into the wind. This is not a problem, since that helps to keep the aircraft flying along the extended runway centerline tracking the heading of the runway.
Sometimes, with strong and/or gusty crosswind, it can look a bit scary on the outside. See this video on http://www.flightlevel350.com/Aircraft_Boeing_747-200F-Airline_TradeWinds_Cargo_Aviation_Video-9159.html, then you know what I mean. In crosswind conditions, the rotation speed should be slightly higher than the normal rotation speed and the aircraft should be rotated somewhat more abruptly than with a normal takeoff. Why? Well, since the aircraft will tend to turn into the wind right after liftoff, there is a risk that the tires will be rubbing sideways across the runway surface and might be damaged.
Crosswind during approach and landing
For the approach and landing, there are basically two method to deal with crosswind. The 'crab' and 'sideslip' (also called 'wing down') method. While the crab method is used with commercial jets and props, the sideslip method is sometimes used by general aviation pilots. The sideslip method is considerably more difficult than the crab method, but not suitable for large aircraft.
Crab method
Approach with the wings level in sideways motion (with the nose pointed into the wind direction) to compensate for the wind while you keep tracking the heading of the runway. Continue doing this until you touchdown, and then use the rudder to align the aircraft with the centerline. This method is only for conditions with slight crosswind. With strong crosswind, use the rudder a few seconds before touchdown to align the nose with the runway heading. Landing in extreme sideways motion can cause serious damage to the landing gear and airframe. It is ok to touchdown with one side of the main gear first. Keep using the rudder to stay centered and keep one aileron into the wind (so move the stick a bit into the wind direction) until the aircraft slows down to avoid lifting up of the wing that is into the wind. The crab method requires good timing, especially in strong crosswind, which requires you to use the rudder to align the aircraft with the runway centerline at the last moment. Once you start to point the nose down the runway with the rudder, the aircraft will immediately start to drift sideways (depending on how strong the crosswind is). So you have to do the transition from crab to slip at the last possible moment.
Sideslip (or wing down) methodWith this method, the initial phase of the approach is flown using the crab technique to correct for drift. Then, one wing must be up into the wind and sufficient opposite rudder must be applied to make the aircraft maintain its centerline. Sufficient rudder and aileron must be applied continuously to maintain the sideslip and can look a bit scary for passengers. The rudder yaw has a tendency to cause the aircraft to roll, so that's why aileron must be applied to control the bank angle. The touchdown is accomplished with the upwind main wheels (the main wheels on the side where the wind is blowing from) touching down just before the downwind wheels. This method is only suitable for light general aviation aircraft and not for jets or even turbo props. There are a few reasons for that: 1.Uncomfortable for passengers, 2.Difficult, 3.Doesn't provide a wings level touchdown.
Use of flaps
Generally speaking, use as little flaps as possible because flaps have a tendency to increase the drifting and turning moment of the aircraft . Fully extended flaps present a larger surface area for that crosswind to affect. After touchdown, extended flaps will allow the wind to have a greater ability to push the aircraft sideways, so retract the flaps as soon as possible. Assuming runway length is not a factor, it's actually a good thing that your approach speed is higher due to the minimal (or no) flaps setting. This is because a faster approach speed means better airplane control, ailerons are more responsive. The use of flaps depends on the type of aircraft. While you can land a small Cessna 172 without using any flaps, a large commercial jet can not without them. The reason for that is the increased stopping distance and the landing gear might collapse due to the high touchdown speed. For jets, just use a minimal flap setting, depending on aircraft type and runway length.
Realism in FS
In Flight Simulator, the views are not that realistic, because most of us have only one display. With extreme crosswind conditions, you're flying sideways (crab method). In a real aircraft, you are be able to move your head to change the direction of your sight. That is not possible in FS, unless you're using Track IR or multiple displays. So that makes it a bit harder than real life. In order to make a successful landing, you need a joystick with rudder control or rudder pedals. It is almost impossible to land with crosswind conditions by using the keyboard. Make sure auto rudder is off in the realism settings of FS.
Damage to the main landing gear caused by extreme sideways motion on touchdown is not simulated in FS. Only the speed of touchdown (or even impact) can cause damage. Make sure that you use an aircraft model with realistic rudder effect. Check the aircraft reviews section to check which aircraft can be used in crosswind situations
