In this experiment, a rainbow appears when the light from the sun is scattered by the water drops. If you are above the water drops, on a hill, for example, the rainbow you see is round.
Stand with your back to the sun and look at the rainbow in the water drops. When white sunlight, which contains all colours, impinges on a water drop, the light is reflected and refracted. This causes the light to be divided into its component colours. Violet light has the shortest wavelength and comes to a position at the bottom, while red light has the longest wavelength and comes to the top.
A natural rainbow can only be seen when the sun is lower than 42° in the sky. Above this, the rainbow is hidden by the horizon. In an airplane above the water drops, it is possible to see a circular rainbow. The same phenomenon also arises in this experiment.