The rainbow of colors reflected in Labradorite is called labradorescence. This is due to light diffracting throughout the minute layers of the various materials comprising the crystal.
Not too surprising, Labradorite is named for the province of Labrador on the easternmost end of Canada where it was discovered in 1770, specifically on the Isle of Paul.
They have a legend that explains the flashing colors of the stone. The legend asserts that Labradorite's rocky shore captured the northern lights. An Eskimo warrior traveling along the coast saw the trapped lights and set them free with the arrowhead of his spear, restoring the Northern Lights to the night sky.