Fire Rainbows are neither fire nor rainbows, but are so called because of their brilliant pastel colours and flame-like appearance. They are formed by the refraction of sunlight or moonlight in plate-shaped ice crystals suspended in the atmosphere. The rainbows are formed by refraction and reflection of light. So called Fire Rainbows are stunning. They are technically known as Iridescent Clouds, a relatively rare phenomenon caused by the clouds of the water droplets of nearly uniform size, according to a release by NASA.