Sunlight and atmospheric factors combine to produce a rainbow. As light penetrates a water droplet, it slows down and bends as it transitions from air to denser water. The light bounces off the interior of the droplet, dividing the wavelengths—or colors—into their component wavelengths. A rainbow is formed as light escapes the droplet.
A rainbow isn't truly a "thing," and it doesn't exist in a certain "location." It is an optical phenomenon that happens when the sunshine and air conditions are just right—and the observer is in the proper position to see it.