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These clouds are commonly found in stratus, altocumulus, and cirrocumulus formations—thin, expansive layers containing small water or ice particles. The phenomenon occurs as sunlight scatters off specific-sized droplets or crystals within these clouds.

As sunlight passes through these particles, it refracts and disperses, creating a spectrum of colors. This phenomenon, called diffraction, creates the stunning rainbow effect we see in iridescent clouds. Regular clouds simply reflect sunlight, while iridescent clouds break it down into its component colors, similar to a prism.

The colors and intensity of iridescent clouds depend on factors such as cloud density, altitude, and the observer's position relative to the sun.