Dispersion is the spreading out of the different colors of light rays.
It is common to think of prisms spreading out or dispersing the colors, but the same effect happens in all transparent media to some degree. The rainbow is produced by many raindrops dispersing and reflecting small amouts of sunlight towards our eyes. Of all the colored rays coming out of each of the raindrops we see only certain colored rays from certain raindrops depending on the angle as the figure below shows. To understand how the rainbow works we need to consider what happens in an individual raindrop. Let's consider the red and blues rays to find the extremes.