The rainbow body phenomenon is a third person perspective of someone else attaining complete knowledge (rigpa).
Rainbow body is mostly known in Buddhism however in Tamil Nadu this phenomena is also known however under different names such as Gnana Deham. Masters such as Manikavasakar, Vallalar and of course Mahavatar Babaji are great examples of this.
The ultimate fruition of the thodgal practices in Buddhism is a body of pure light, called a rainbow body (Wylie 'ja' lus, pronounced Jalü.) If the four visions of thogal are not completed before death, then at death, from the point of view of an external observer, the following happens: the corpse does not start to decompose, but starts to shrink until it disappears. Usually fingernails, toenails and hair are left behind (see e.g. Togden Urgyen Tendzin, Ayu Khandro, Changchub Dorje.) The attainment of the rainbow body is typically accompanied by the appearance of lights and rainbows.
Some exceptional practitioners such as Padmasambhava and Mahavatar Babaji are held to have realized a higher type of rainbow body without dying. Having completed the four visions before death, the individual focuses on the lights that surround the fingers. His or her physical body self-liberates into a nonmaterial body of light (a Sambhogakāya) with the ability to exist and abide wherever and whenever as pointed by one's compassion.