PWL admin and storm chaser Micheal Beazley recently captured this great example of an iridescent cloud. Iridescent clouds appear when light is diffused by small water droplets or small ice crystals. Larger ice crystals produce halos (article coming soon).
When clouds (usually altocumulus,cirrocumulus or lenticular clouds) have small droplets or ice crystals of a similar size, the cumulative effect of light passing through them is seen as colors. In order for this to happen, the cloud must be very thin, so that the rays of light encounter only a very thin layer of water droplets or ice crystals. As in the image above, iridescence is mostly seen at cloud edges or in newly forming clouds , which tend to produce the brightest and most colourful iridescence. This is due mainly to the fact that in a newly forming cloud, the majority of the water or ice particles are all the same size.
The best way to see iridescent clouds is when the sun is behind another, thicker cloud or behind an object like a mountain or building.