They are actually circular.

The thing is they appear as a circle with the center being in the exact opposite side of your head from where the sun is.

If you look at a rainbow the sun is behind you and the center of the rainbow is exactly on the opposite side of where you head is.

There is a line from the sun, though your skull to the apparent center of the rainbow.

Obviously since the sun tends to be in the sky, the center of the rainbow tends to be below the horizon.

If you are high up in an airplane or similar you may be able to see the full circular rainbow if the sun is low enough.

The sun shines at the water droplets in the air and due to the way light going from air to water and back works part of it ends up back where it came from. Sort of like a mirror.

So if you just had a single color of light shining at water droplet in the air from behind you, you would see a single thin ring of that color.

Since different wavelengths of light get thrown back at slightly different angles you don't see just one white ring but a spectrum of visible light drawn out across the rainbow

It works light a prism splitting up light into a rainbow of colors when the light goes from air to glass and back to air and the surfaces where the glass to air interface are, are at an angle.

The raindrops are made of water not glass and they are spherical not prism shaped, but it is the same general principle.

The spherical shape also means that the light acts the same way in any direction all raindrops that are at a certain angle from the line from the sun through you will send the light back at you.

That angle is about 42°.

There are additional fainter rainbows at different angles that you don't really see easily with your eyes, but that can appear on photographs.