Oriented plate crystals produce the CZA. These are the same crystals that form sundogs. Downcoming sunrays enter the uppermost horizontal face and then leave through a vertical side face. The result is the refraction of rays that produce very pure and well-separated prismatic colours.
Image: A CZA lights threads of early morning cirrus. Imaged by Eva Seidenfaden (Atmospheric Optics) in April 2003