There are many questions about Flash and EEPTOM differences. Well these are two different technologies converging together.
Flash technology was created to replace mass storage media. Requirements for Flash were minimum power consumption and high number of write cycles. Information written in flash memory is usually in blocks at a time.
EEPROM was originally designed to store configuration information or store programs to be boot loaded by microcontrollers or other devices. EEPROMS usually are smaller capacities and can be programmed in smaller information quantities like bytes or bits (serially). Read time is shorter than from Flash but EEPROM has less write cycles. But recently these differences are disappearing as technologies are catching up.
So this should explain why in microcontrollers like Atmega128 is more convenient to write data to EEPROM than to Flash. If you would like to store data in flash you would have to rewrite whole sector of 128 bytes in order to store one byte. But if you consider to store bigger information chunks Flash can be good choice too.
For more information you might consider reading http://www.embedded.com/98/9801spec.htm
