Ahhh, fun fun =)
Here’s the way I usually go about this:
-make a solid and apply fractal noise to it
-tweak the fractal noise settings until you have something that looks wave-like (white areas will be ‘high’ and black areas will be ‘low’)
-pre-comp this solid
-put the layer you want to wave below the pre-comped fractal noise, pre-comp this layer as well and make sure that the solid/banner/whatever you want to wave doesn’t reach the edges of the pre-comp (this is necessary to have the edges of the layer pick up the fractal noise displacement)
-apply a Displacement Map to the layer you want to wave and choose the pre-comped fractal noise as the height map’s source
-duplicate your waving layer and place it above the fractal noise layer, set the fractal noise pre-comp to use the waving layer as an alpha track matte
-set the fractal noise pre-comp’s blending mode to multiply (this adds ‘shadows’ at the low points)
-tweak the settings to something you like, animate the fractal noise to make it look like the banner is blowing in the wind
It may seem like more steps than you need, but it’s pretty easy once you understand what you’re doing (so pay attention!) and the results are worthwhile.