Adobe Flash Player can be used for accessing web cameras and microphones connected to your computer, store cookies plus infamous supercookies and data on your computer's hard drive and even upload content to other users. Therefore it is important to set Adobe Flash Player settings to safest possible - you probably know how often security bugs are found in the Flash Player. 
First, please make sure you are running the latest version of Adobe Flash Player by visiting my Browser and Plug-in Check page. This is your first step to more secure configuration!
To add a free protection layer from even unpatched security bugs, please read the Microsoft EMET article!
Adobe Flash Player Settings Manager in Windows
In Windows XP, Vista and 7, click Control Panel on the right side of Start menu.
In Windows 8, use keyboard shortcut Windows Key+W to open Settings Search. Type "flash" into Search box and click Flash.
In Windows Vista and 7, it is best to type "flash" into Control Panel Search box to quickly locate the Adobe Flash Player applet. You can also use Category View to locate it.
Then click Flash Player or Flash Player (32-bit).
In Windows XP, you must switch Control Panel to Classic View first. Do this by clicking the Switch to Classic View link on the left. Then locate and double-click Flash Player.
Storage Settings - Flash cookies, Supercookies
Flash Player Settings Manager opens in Storage tab. This is the tab related to Flash cookies that many companies (mis)use for tracking users' behavior online. While not all Flash cookies are sneaky, it is best to keep these away. Do this by clicking Block all sites from storing information on this computer.
Please note that this might affect a few online games or video sites - game progresses are not saved or videos do not play (YouTube and other major video sites are not affected by the setting).
A warning window about deleting all stored cookies appears. Click OK.
Removing all stored Flash cookies
If you want to erase all Flash cookies later or you did not see the warning message, click the Delete All... button on Storage tab.
Delete All Site Data in Flash Player window opens with the first option, Delete All Site Data and Settings, selected by default.
If you are selling or recycling your current computer, it is recommended to select the Delete All Audio and Video License Files option, too.
Click Delete Data to erase all stored Flash cookies.
Camera and Mic - who's watching and listening?
Click Camera and Mic tab above.
To prevent unauthorized access to your webcam and microphone, use the default option - Ask me when a site wants to use the camera or microphone (recommended). This will pop up a prompt each time a web site tries to see or hear you.
In case you need to be extra private, use the Block all sites from using the camera and microphone option instead.
Playback - sharing your upload bandwidth with others
Click Playback tab. The name is quite misleading, it configures peer-assisted networking instead.
Most internet connections have very limited upload bandwith, so it is not advisable to share it with other users who visit the same web site. If your upload bandwith is full or nearly full, it will also strongly affect download speed (web pages open very slowly).
To prevent slowdowns, click Block all sites from using peer-assisted networking.
Advanced - checking for updates and deauthorizing your computer
Click Advanced tab.
The first button, Delete All... does exactly the same as the Delete All button on Storage tab - removes all stored Flash cookies.
In Updates section, select Install updates automatically when available (recommended). This setting is available since version 11.2 of Adobe Flash Player, and it really updates the program automatically. If you have some older version of Flash Player, you should use free Secunia PSI for fully automated updates of Flash Player.
Please note that current version numbers are also displayed here, both for ActiveX (Internet Explorer) and Plug-In (all other Internet browsers).
To check for updates right away, click Check Now.
If you want to sell or recycle your computer, you should deauthorize the computer first. This removes all licenses for purchased or rented content, such as audio and video files.
To do this, scroll the page down and click Deauthorize This Computer...:
A Deauthorize This Computer window appears. Close all open Internet browsers and click OK to erase all licenses.
And that's it - Adobe Flash Player configuration is now safer. 
