I am afraid that this is not a very good picture, first because the colors are not very well defined and second because I could not find a single, smallish object with which to block the sun, so I had to settle for this tree.
I could not immediately find a halfway decent explanation of cloud iridescence. Wikipedia says it is a diffraction phenomenon, with no elaboration. Here is what I think is going on.
I do not feel like drawing any cartoons, so please have a look at the Wikipedia article on the Airy disk. About 2/3 of the way down, you will see a plot of intensity as a function of angle. This plot represents the diffraction pattern of a circular aperture. The pattern shows a series of secondary maxima at various angles off axis. The first secondary maximum has an intensity of approximately 2 % of the intensity at 0.
What has the Airy disk to do with iridescence? Oddly, the diffraction pattern of a circular obstacle is the same as that of a circular aperture, except near 0. If the cloud cover is thin enough and the droplets are all approximately the same diameter, we may see colored fringes, because we are standing at the location of the first secondary maximum of a particular wavelength. The angle 0 in the Wikipedia figure is the line between the sun and a droplet; it is not directly in line with the sun from our point of view. We may see several different colors because the secondary maxima of different wavelengths appear at different angles.
In the picture above, we do not see colors very clearly, most probably because the droplets do not have the same diameter. However, because the cloud is between us and the sun, we see a circular halo all the way around the sun, which suggests to me that the droplets are spherical and (I would guess) liquid water rather than ice crystals. (Ice crystals like to be snowflakes, hexagonal cylinders, or flat hexagonal plates. These are oriented by viscous forces, so the scattering pattern would not demonstrate circular symmetry.)
Finally, if you look to the right of the first ring of colored fringes, you will see a second partial ring, which represents the second secondary maximum of the diffraction pattern.