Which version of Word is important for a specific answer to this question.
What Version of Office am I running?
http://office.microsoft.com/en-ca/excel-help/what-version-of-office-am-i-using-HA101873769.aspx
Includes pictures for 2003, 2007, 2010, 2013, 2013 RT
http://www.shaunakelly.com/word/management/what-version-of-word-do-i-have.html
http://www.7tutorials.com/6-ways-learn-exact-version-any-application-you-are-using
Most people are using 1 of 3 Office versions: 2003, 2007 or 2010. There is a major split between in the user interface between 2003 which is the “old” Menu system and 2007 which uses the “new and improved” Ribbon.
In general I know of no WordArt style that automatically gives each letter a different color.
But WordArt does allow you to apply various color gradients to the text. You can check in Text Fill color, look for the "Gradient" command.
As well 2003 WordArt does have a couple of styles that apply "rainbow" type color effects. One vertically in the letters, another horizontally. The horizontal one is a smooth range of colors rather than discrete colors in each letter.
This link has an example of the 2003 wordart options.
Understanding WordArt
http://word.tips.net/T001816_Understanding_WordArt.html
Wordart Text Effects in Word 2003 and Word 2007
http://news.office-watch.com/t/n.aspx?articleid=1474&zoneid=12
Making ordinary texts look extraordinary has been possible for many versions of Word. Alas, the features can make ordinary text look awful – if you’re not careful.
Create 2003 format WordArt in 2010 via macro
http://answers.microsoft.com/en-us/office/forum/office_2010-customize/i-have-microsoft-2010/ab79d37b-5419-4de7-b843-a7ef28808ff9#_self
“Classic” 2003 / 2007 WordArt in Word 2010 / 2013
http://gregmaxey.mvps.org/word_tip_pages/classic_wordart_in_word2010_2013_documents.html
MS Office 2010 Text Effects Transform Options
http://www.worldstart.com/tips/tips.php/ms-office-2010-text-effects-transform-options
This link has some really interesting "non-standard" Text Transforms
Advanced Text Transforms in PowerPoint 2010
http://www.indezine.com/products/powerpoint/learn/textandfonts/advanced-text-transforms-ppt2010.html
Excerpt/Capsule: Learn how you can tweak your text transforms beyond the available presets in PowerPoint 2010.