This optical phenomenon is the rainbow-like coloration that occurs with refractive materials like diamonds, crystal glass, and glass prisms (think Pink Floyd). Such light transmission causes the incoming light to separate into its component colors as it passes through the medium. The result is colorful, sparkly goodness.
For more about dispersion, check this Wikipedia page. While Cycles does not yet support an ‘official’ dispersion feature, it can be simulated by layering glass nodes as demonstrated in this video.
Left: No-dispersion Right: With dispersion
CC Attribution: “Diamond Ring” by danilius from BlendSwap.com