A regular seam leaves a ridge of folded fabric and thread on the inside of the garment, right where it touches skin. A flat seam is sewn and pressed so the fabric lies down flat instead of standing up in a ridge. It still holds the two pieces of fabric together just as well, it just doesn't leave a raised bump for a baby to lie or roll on.
Babies and toddlers can't tell you a seam is bothering them, and they can't just shift their shirt the way an adult would. A ridge at the back of the neck, across the shoulders, or around the leg opening ends up pressed into the same spot for hours, especially during naps or long car rides. Flat seams remove that pressure point, which matters more on close fitting basics like bodysuits and pants than on looser outerwear.
We sew all our muslin pieces with flat seams as a standard part of how we build each garment, on top of double-layer muslin cotton that's pre-washed so it arrives soft instead of stiff. We use child-safe dyes and skip harsh finishes on the fabric itself. Wash cold on a gentle cycle, tumble dry low or hang to dry, and skip the fabric softener since it coats the weave and works against how muslin is meant to feel.