The colors are evidence that light energy travels as waves. Some of the light reflects from the surface of the oil. When the light passes from the oil to the water, more of it is reflected. The two reflections are slightly out of sync, since one travels slightly farther than the other.

Because light acts as waves, if two waves of the same color meet when they are in sync, the color will be brighter. If two waves of the same color meet when they are not in sync, the color will be dimmer or totally absent.

While these colors indicate that light acts as a wave, there are other experiments which show that light acts as a particle. Now we talk about light being made up of photons, which can act as either a wave or a particle.