What does appearance of rainbow represent in Vajrayana Buddhism?

A rainbow is caused by sunlight and atmospheric conditions. Light enters a water droplet, slowing down and bending as it goes from air to denser water. The light reflects off the inside of the droplet, separating into its component wavelengths or colors. When light exits the droplet, it makes a rainbow.

For Buddhists, the rainbow recalls the Prajnaparamita teaching on the emptiness of form. These striking atmospheric manifestations that arise at the transitional time of the year, or of a changing weather, are also understood in Vajrayana Buddhism as indications of blessings from Buddha, Bodhisattvas, Dakinis or Deities.

For Vajrayana Buddhists, the appearance of rainbows also has a spiritual meanings as it marks either the passing on of a wise sage, a special yogis or spiritual master, or it foretells the birth of a significant reincarnation. 

Indeed the passing of high Lama or enlightened masters is often accompanied by the appearance of beautiful rainbows in the skies.

In many biographies of Rinpoche and Tulkus, one salient feature is the appearance of rainbow when they are born. Likewise, when a special reincarnate child is born, rainbows often appear as a sign in the skies.

We also see rainbow around clear sun whenever monastery or stupa are consecrated. Sometimes just the presence of a highly realized Yogi or spiritual master or Rinpoche near a particularly sacred place is enough to create the appearance of rainbows. 

Therefore, rainbows do have deep meaning in Buddhism and seeing it brings good omen. 

When you see a rainbow next time just do some research nearby, you will discover something.