There are many rainbows around waterfalls on a sunny day. You can also see rainbows after it rains but the atmospheric conditions have to be met for it to show up. Rainbows are formed out of millions of microscopic drops of water which act as a prism against the sunlight. Rainbows can have anywhere from 3 to 7 colors.
A rainbow with all seven colors is RARE, anyone who has seen one should consider himself/herself extremely lucky.