While doing some development in Flash Builder using Starling (for mobile), I got the error:
This application is not correctly embedded (wrong wmode value)
Solution (Flash Builder 4.5+):
Change the renderMode in the XML app config file to either 'direct' or 'gpu'.
Solution (Flash CS5.5):
Under publish settings, click the Wrench icon on the left of the Player drop down near the top. Here you can choose to set Render Mode to GPU. At this point, you can't set it to "direct".
CS5.5 users may be able to set render mode to "direct" with this solution: http://blog.michaeljbowen.com/?p=127