Issues can be created:

1. Manually.
2. Dynamically using the Create Issue Action on Flow Builder. You can create an issue for a step based on conditions that arise from proceeding a step. e.g. If these conditions exist, the next step cannot start until this issue is resolved. See here.

1. Issues can be associated with a step and assigned to a user (or any Responsibility).
2. An issue can be used to prevent the continuation of a flow until that issue is resolved.