Believe it or not, Continual Flame, when cast from a 3rd-level slot, has a niche use as a deterrent against Darkness. Because Darkness only blocks magical light of a 2nd-level or lower spell and this effect does not scale with higher level slots. This means you may not need to prepare, much less learn, the spell Daylight or need to spend a resource to counter it.

I had a dwarf fighter who got the party cleric to cast continual flame on his helm.  He thought it made him look badass.  

...I think he was right.

Why is this a level 2 spell? Please explain.

I believe it not. 

This has been hotly debated and both designers have said they do not believe upcasting continual flame works like this. The rules about upcasting spells are quite clear but it seems that the text for magical light and darkness spells is not. I think they mean that they are dispelled by light or darkness spells that are a higher minimum spell level than each other regardless of slot used. 

It’s one of those situations you need to check with each GM unfortunately.

My current tiefling has this spell on her tail lol

Do parts of your body count as "objects?"

As a DM I would argue that you might need to actually cast it on something non-living.
Sure an easy workaround for the tiefling's flaming tail for example would be to just wear a ring on the end of the tail, and have the enchantment cast on the ring. Such a detail and decoration would bring a tiny bit of realism to such an ability in my opinion.

Also, as a counter against Darkness when cast from a 3rd level slot, I would argue that the spell gains nothing from being up-cast, because it doesn't state that it does in the description.
Otherwise it would have given details for 3rd level and higher, with details regarding how much larger and brighter and inextinguishable it is compared to the size and brightness of a torch. Casting it at higher levels doesn't turn it into a brighter or different type of light. It doesn't change at all. It's still a 2nd level magical light, you just expended a higher slot to make it happen.

So if the brightness/size/intensity are no different than that of the 2nd level version, I would argue that since Darkness can dispel its 2nd level form, it would be able to dispel its higher level forms, because there is no change. You would just be willingly throwing away a higher level spell slot. (hopefully only because you ran out of lower level slots)

My group relies on one house rule:

The Rule of Cool.

It got to the point that it was so extra that it became her "mood ring" haha

In regards to the spell not gaining anything for upcasting, I'd like to argue that it matters in regards to Counterspell, needing a roll to dispel it if the Couterspell was cast at lvl 3 and the Continual Flame was cast at lvl 4.

So, if you cast this on a castle, could you create a flaming castle? Or you could cast this as a wall of flame on the ground that you could pass through?

@Daemonator

Charmander! 😆

"When a spellcaster casts a spell using a slot that is of a higher level than the spell, the spell assumes the higher level for that casting. For instance, if Umara casts magic missile using one of her 2nd-level slots, that magic missile is 2nd level."
https://www.dndbeyond.com/sources/basic-rules/spellcasting#CastingaSpellataHigherLevel

"If any of this spell's area overlaps with an area of light created by a spell of 2nd level or lower, the spell that created the light is dispelled."
https://www.dndbeyond.com/spells/darkness

Continual Flame cast using a 3rd-level slot is a 3rd level spell. A 3rd level spell is not 2nd level or lower.

If I'm gonna use a third level spot to dispel darkness, I'm gonna use Fireball to dispel caster.  Guano is cheaper than a 50gp ruby each time.

Quote from Mindseye >>

If I'm gonna use a third level spot to dispel darkness, I'm gonna use Fireball to dispel caster.  Guano is cheaper than a 50gp ruby each time.

 

 Sure, but if they recast then 1 3rd level slot is cheaper than 2!

Magic Missile, as well as any other spell with something gained from casting at a higher-than-minimum level, specifies the effects of casting at the higher level.

At Higher Levels. When you cast this spell using a spell slot of 2nd level or higher, the spell creates one more dart for each slot level above 1st.

Emphasis is not mine.  The format of "at higher levels" is included for any and all spells that can be "upcast".  Nowhere does anything state that spells without such a designation gain anything from being upcast, they only use the higher slot (as in such cases as someone else mentioned, b/c you are out of the lower level slots).  Obviously, for non-AL games, it is up to DM discretion, but I would argue that AL uses RAW and it is not written that this spell gets any benefit from being used at a higher level.

Casting Continual Flame at 3rd level, there is no "higher level" for the spell to "assume".  Magic Missile has higher level effects to "assume".  Other spells do as well, and they are always called out as such.

https://www.dndbeyond.com/sources/basic-rules/spellcasting#SpellSlots

When a character casts a spell, he or she expends a slot of that spell's level or higher, effectively "filling" a slot with the spell. You can think of a spell slot as a groove of a certain size--small for a 1st-level slot, larger for a spell of higher level. A 1st-level spell fits into a slot of any size, but a 9th-level spell fits only in a 9th-level slot.

You say Continual Flame gains nothing from being cast with a higher spell slot, but clearly it does or this discussion would be moot. The rules say clearly that you can cast a spell with any slot of equal level or higher, and that the spell becomes that level.

Continual Flame gains nothing mechanically from being upcast, but it can be upcast like any other 8th or lower leveled spell. What it does gain is being harder to dispel with dispel magic.

I find the big draw to the spell is that you wouldn't need to have the light cantrip. You simply cast the spell once on a candle or similar tiny object, maybe stick it in a lantern and pull it out of your backpack with your free action when you need it. Unseen servant plays a similar role in regard to mage hand.

Continual flame lets you summon a magical flame that never stops "burning" unless you use your action to dispell it or another caster uses a dispelling spell on it. So you won't be using 50gp everytime unless you want to undo the spell everytime you're not using it.

since you can cast this on basically infinite things, you could have a full fire suit, I bet it would look pretty cool 

I am in the camp that casting this at a higher level does affect whether it is dispelled by Darkness or by Dispel Magic. I think that follows from RAW. Something to consider besides "it's just using a higher level spell slot, so what" is when do characters gain access to those slots.

For example, consider a level 3 caster without dark vision. If they know they will need to see in the dark soon, they might consider making themselves a flaming dagger or such. If they cast it right away, the 50 GP of ruby dust might be wasted if they run into Darkness. But if instead they can afford to wait until level 5, then they can make a more durable magical effect. And that's as it should be: a more powerful caster should be able to invoke stronger magic. So furthermore I think RAI it makes more sense to be able to get something extra out of casting at a higher level.