This firmware is to be flashed to the atmega88 of the pentabug. The Makefile supports 2 different ways of flashing the firmware image:
the serial bootloader way
target of the Makefile You can flash the microcontroler via the serial bootloader that is part of the initial firmware.
the isp way
target of the Makefile you can flash the microcontroler via an isp programmer. Adjust the avrdude settings to Your programmers needs beforehand.