The rainbow effect is basically a flutter of colored light that exists on DLP based projectors, especially in darker scenes. It is most apparent in the 2-3x speed DLP wheels. I've heard that when you get into the more expensive DLP's with faster wheels, it may not be a problem.

If you place both of your hands in front of your face about 8-10 inches, with your fingers spread apart, and then move your hands side to side real fast crossing each other, that is what it looks like.
Anthem AVM60 Outlaw 7700 Emotiva A500 Epson 5040UB