Great question. I remember asking the same question in school!

Let's start with refraction. In a way, refraction simply means that light travels at a different speed in different materials. It's fast in air, and slower in water or glass. This has the effect of changing the direction of light, or bending it, when it moves from one material to the other. Here's one way to think about why it changes direction. Let's say you're driving a Segway along a road next to a thick, grassy field. And say you can drive faster on the road than on the grass. Now if one wheel drops off the road into the grass, what happens? That wheel will suddenly slow down, which will turn you toward the field (assuming you don't steer to correct it). Once both wheels are on the grass, you'll go straight again--but away from the road. The transition from the road to the grass made you take a turn. The same is true of light moving from air (the road) to glass (the grass).

But why do different colors go in different directions? This is because different colors of light travel at *different speeds* in the glass. So from the analogy above, slower speeds in the glass make the light bend more. We call this effect dispersion, since it disperses the colors in different directions. Blue light travels slightly slower in glass than red light, so it bends a sharper angle when it enters the glass from air. In physics, we say the glass has a higher refractive index for blue light than red light. There is a formula (Snell's Law) that you can use to calculate angles from refractive index, or the other way around.

When we send white light into a prism, we are actually sending in a mixture of all colors. A prism does not create colors from white light. As you said, it just separates out the different colors that are already there. The most accurate scientific explanation for HOW refraction actually works is a theory called quantum electrodynamics.That theory is a difficult subject, too detailed for me to explain here, but maybe I can give you a feel for what happens in a prism. The different colors of light all travel at roughly the same speed in air. In glass, however, this is not true. Blue light gets slowed down by glass more than red light. As a result of their different speeds in the glass, the red and blue light get bent at different angles when they go into the prism. This separates blue from red, and in fact it separates all of the colors we can see.

Perhaps you are wondering "So why do different colors travel at different speeds in glass?" It has to do with the way that light interacts with atoms in the glass - that is what quantum electrodynamics is all about, how light interacts with atoms. There is a book called QED by Richard Feynman that would probably be the best place to start learning about quantum electrodynamics if you are curious to learn more. Most books about this subject require a lot of studying and math, but this one is written for people who are just curious but don't have the time or patience to learn all the details.