This happens when light goes through the water drops in the atmosphere.
Now, you are completely right, light travels in a straight light, but when it changes medium from air to water (as it happens when the rainbow is formed) the trajectory of light is bent! What is more fascinating is that, each particular colour (which corresponds to different frequencies or wavelengths of light), bends by a precise amount! In order to see them, you would need to be at a particular angle in relation to the sun, and you will see the different colours coming from different positions in the sky, as they are all bent differently. This is why you see different layers of colours, all with a different curvature!
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