I can see a rainbow colored pattern on my iPod screen. Is it faulty?

The rainbow effect (photoelasticity-the effects of stress, such as double refraction, on the optical properties of transparent materials) is well documented with the iPod – some suffer from it more than others and your ambient light conditions will make it appear worse. In a nutshell – stresses in a clear material cause polarized light to bend and colors to seperate as it passes through the material. Thus, if you have a defect of some sort in your iPod’s screen, when you are in polarized light, you will see a rainbow appear across the iPod. It just so happens that when the sun is lower on the horizon, it tends to polarize (read- wintertime sun).