Opal is a hydrated form of silica (water content varies from 3% - 21%)

 Mexican fire opal

Rough Opal

Scanning electron micrograph of amorphous silica spheres closest packed in an Australian fire opal showing red interference colors. Sphere size is ~2500 Ångstoms. Photo courtesy of Hans-Ude Nissen. Cover of Reviews in Mineralogy vol. 29 "Silica"

This regular array of balls of opal act like a diffraction grating that will refract various wavelengths (approximately the same wavelength as the diameter of the spheres). Different sizes of spheres will diffract different wavelengths of light thus giving rise to the various flash of different colors.

http://www.minsocam.org/msa/collectors_corner/aam/opal.htm