If the sun is behind you, and there are some droplets of water (rain or mist) in front of you and you look up at them (around 40 degrees in angle relative to the earth) you see the suns rays that have been ‘refracted’ through the water droplets. The droplets act like little prisms. As white light from the sun is made up of all the colours (Richard Of York Gave Battle In Vain – all the colours and a bit of history in one nemonic!) and each colour is refracted, or bent by a different amount in the droplet, the colours are split up and separated. When this split light leaves the droplet it no longer appears white, but like a rainbow.
Hard without a diagram, have a look here:
I think even more amazing are double rainbows (notice how the colour patter is the opposite in the second rainbow? This is the light bouncing off the inside of the droplet twice, rather than once):