The “damage” referred to by “Dark Flare Knight” is Battle Damage.
Netrep Rulings:
One “Mirage Knight” may be summoned for each “Dark Flare Knight” destroyed as a result of Battle.
If “Dark Ruler Ha Des” destroys “Dark Flare Knight” as a result of battle, “Dark Flare Knight’s” effect of being able to Special Summon “Mirage Knight” will be negated.