How do we get a rainbow effect from a CD?

The reason a rainbow effect is created on oil is because of interference. Oil on a puddle will tend to create a thin film, which can be anything from 10 to 100 molecules thick, so it's very thin. Each of them can act like a tiny mirror, so when light hits the surface of an oily puddle, some will reflect off the water under the oil, and some will reflect off the oil layers.As light is a wave, if you cause the waves to stop lining up with each other, you can get the 'up' part of one wave aligning with the 'down' part of another wave, and these can cancel out. This is called interference, and it causes a pattern of colours according to how much interference is occurring. Oil films of different thicknesses cause different amounts of interference, so you get a rainbow effect.The same effect is seen on the surface of a bubble, which is also a thin oily film with varying thicknesses.