Making cake that is rainbow on the inside will require the following steps:
1) Using white cake, divide you batter up into five bowls.
2) Now add food coloring to each bowl for each color of the rainbow. I prefer to use gel food coloring. This can be found at an arts and craft store with a cake decorating section.
3) Once you have all your colors you will want to pour in each color one at a time. Pour the color into the center. Then pour the next color into the center. Do not stir or mix.
4) Bake your cake!
5) When it's done your cake will create rainbow circles on the top, but when you cut into it you will have bands of rainbow color!
The original link where I learned how to do this is: http://www.omnomicon.com/rainbowcake
This page has great photos and explanations on how to make this cake!