The readable side of a compact disc contains no rainbow pigment, yet bands of colour move across it under white light. The effect comes from the tightly packed spiral track that carries the data. Adjacent turns are about 1.6 micrometres apart, a spacing comparable with visible wavelengths, so the repeating structure can behave as a reflective diffraction grating.
White light contains many wavelengths. When it reaches the track, waves reflected from neighbouring positions overlap. In a particular viewing direction, some wavelengths arrive with crest aligned with crest and reinforce one another, while others do not. Each wavelength meets this condition at a different angle, so red, green, blue and the colours between them leave in different directions. Rotating the disc changes the illumination and viewing geometry, and therefore changes which colour reaches the eye.
This is not the same mechanism as a prism. A prism mainly separates colours because its refractive index varies with wavelength, bending each colour by a different amount. A CD uses diffraction and interference from a regular structure. Nor is it the same as the colours of a soap film, which arise from interference between reflections at the film's two surfaces. All three can spread white light into colour, but the physical arrangements differ.
An ordinary lamp is enough to observe the effect safely. A laser is unnecessary, and a laser beam should never be directed towards anyone's eyes. The rainbow does not reveal what information the disc stores. It reveals how the microscopic track carrying that information is arranged.
https://www.ebsco.com/research-starters/science/diffraction-grating
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