This bright ring of light is quite common. It’s related to the same process that creates rainbows: refraction. In this case, moonlight shines through a layer of ice crystals high in the atmosphere. The ice crystals act like prisms, splitting the light into a rainbow of colors that surrounds the Moon. If the effect is intense enough, the colors are visible to the unaided eye. If not, then the ring around the Moon looks milky white.
Incidentally, the ring has some practical value, too. The thin clouds that cause the rings often precede cold fronts or storm systems, so they may indicate that rainy weather is on the way.