Clipping Masks in Illustrator require a single vector path or compound path.
It is not possible to create a clipping mask using a raster image. It simply can't happen. If that cat's head is raster, and it sure looks like it, that is the problem.
If your goal is to merely clip the flag, as it currently appears, to be contained within the shape of the cat's head, then you need to create vector path which outlines the cat's head. Then use that path for the clipping mask. Afterwards merely position the clipped art above the cat's head in the stacking order, aligning them correctly.
If the goal is to have the flag use the tonal variations of the cat's head, then an Opacity Mask (2) would be more appropriate. You can create opacity masks using a raster image. The raster image becomes a "value map" for the underlying artwork - dark areas in the raster image are hidden (masked) more than light areas.
In general, high contrast images work best for Opacity masks. The image posted in the question isn't very high in contrast.