Barry Allen / The Flash will appear in episodes 8th & 9th of Arrow Season 2. Episode 20 will then function as a backdoor pilot for The Flash to spin-off into his own new TV series.
From a Hollywood Reporter interview:
"When we first meet Barry Allen, he's just a forensic scientist … an ordinary man," Kreisberg said. "Part of the fun for the audience … is to see how we view our Arrow take on the Flash legacy. Some of it will feel very familiar to DC Comics, some of it hopefully will feel different, fresh and exciting. The same way we approached Arrow is the same way we're approaching Barry."
The biggest surprise with this announcement has been that "Arrow" appears to be straying from their "No super powers" model that they adhered to for the first season. Kreisberg added, "There will be extraordinary events in the world and the characters will react in the same way."
Before you begin to type out that comment about how The Flash won't ever actually be in his costume and never be called "The Flash," Kreisberg says you have nothing to worry about. "No sweat suits or strange code names; he will be The Flash."