The beast known as the Rainbow Creature was born from freak accident involving a volcano. Nothing more about its origin is known. Whatever its origin, a revolutionary named Diaz used the Rainbow Creature as scare tactics against his unnamed South American country.
When Batman and Robin come to the country to assist the country against the country against Diaz, they encounter the Rainbow Creature. The red stripe on it is capable of burning through objects, the blue stripe is capable of making projectiles brittle with intense cold, the yellow aura turns things into mist and the green aura somehow flattens the victim into a 2 dimensional state.When one of its colors are used, that stripe is rendered white and must be replenished by stealing color.
Batman and Robin are able to figure out how to beat the Rainbow Creature after finding out that Diaz does not control it. By forcing the Rainbow Creature to use all of its powers, the creature disintegrates into dust that is blown away by the wind.
This story was rendered moot by the Crisis on Infinite Earths. However, it was recently shown that this is one of the cases Batman keeps in his Black Casebook, casebooks filled with bizarre cases. Like the similar case "Robin Dies At Dawn!", it is likely this was an hallucination brought on by one of his many enemies' chemical weapons.
Appearances in Other Media
Batman: Brave and the Bold
The Rainbow Creature first appears in Brave and the Bold in the episode "Legend of the Bat Mite!", in which Bat Mite creates a figment of it along with other monsters from the sci-fi era of Batman to fight Batman.
It appears again later in the episode "Emperor Joker!" as a creation of Firefly, here using his original colored lights schtick. After Batman foils Firefly by using a different colored Batsuit each night, since Firefly's lights don't work on objects of the same color, he creates the Rainbow Creature. Batman is able to destroy the Rainbow Creature by activating a feature on his Batsuit turning it into a rainbow striped suit, making it immune to the Creature. Ultimately, Batman is able to reduce the Creature back to its original state of colored lights by punching it.
This incarnation possesses all of the powers the Rainbow Creature originally possessed in the comics.