|MadSci Network: Earth Sciences|
Rainbows require raindrops. They don't have to be where you are. The raindrops just need to be on the opposite side of you from the sun.
Actually a rainbow may be easier to see if the raindrops aren't where you are. There would be fewer clouds between you and the sun letting more light hit them.
A web site that has a good explanation of rainbows (and has appeared in the MadSci archives) is here. Another good site is Sundog. Sundog has examples of many optical phenomenon such as glories, corona, halos, fogbows, sundogs and iridescent clouds.
Try the links in the MadSci Library for more information on Earth Sciences.