Precious opal shows a variable interplay of internal colors, and though it is a mineraloid, it has an internal structure. At microscopic scales, precious opal is composed of silica spheres some 150 to 300 nm in diameter in a hexagonal or cubic close-packed lattice. It was shown by J. V. Sanders in the mid-1960s[7][8] that these ordered silica spheres produce the internal colors by causing the interference and diffraction of light passing through the microstructure of the opal.[9] The regularity of the sizes and the packing of these spheres determines the quality of precious opal. Where the distance between the regularly packed planes of spheres is around half the wavelength of a component of visible light, the light of that wavelength may be subject to diffraction from the grating created by the stacked planes. The colors that are observed are determined by the spacing between the planes and the orientation of planes with respect to the incident light. The process can be described by Bragg's law of diffraction.

Visible light cannot pass through large thicknesses of the opal. This is the basis of the optical band gap in a photonic crystal. The notion that opals are photonic crystals for visible light was expressed in 1995 by Vasily Astratov's group.[10] In addition, microfractures may be filled with secondary silica and form thin lamellae inside the opal during solidification. The term opalescence is commonly and erroneously used to describe this unique and beautiful phenomenon, which is correctly termed play of color. Contrarily, opalescence is correctly applied to the milky, turbid appearance of common or potch opal. Potch does not show a play of color.

For gemstone use, most opal is cut and polished to form a cabochon. "Solid" opal refers to polished stones consisting wholly of precious opal. Opals too thin to produce a "solid" may be combined with other materials to form attractive gems. An opal doublet consists of a relatively thin layer of precious opal, backed by a layer of dark-colored material, most commonly ironstone, dark or black common opal (potch), onyx, or obsidian. The darker backing emphasizes the play of color, and results in a more attractive display than a lighter potch. An opal triplet is similar to a doublet, but has a third layer, a domed cap of clear quartz or plastic on the top. The cap takes a high polish and acts as a protective layer for the opal. The top layer also acts as a magnifier, to emphasize the play of color of the opal beneath, which is often of lower quality. Triplet opals therefore have a more artificial appearance, and are not classed as precious opal. Jewelry applications of precious opal can be somewhat limited by opal's sensitivity to heat due primarily to its relatively high water content and predisposition to scratching.[11] Combined with modern techniques of polishing, doublet opal produces a similar effect to black or boulder opal at a fraction of the price. Doublet opal also has the added benefit of having genuine opal as the top visible and touchable layer, unlike triplet opals.