The oil used in rain lamps is typically mineral oil. In a rain lamp, oil falls from the storage area at the top of the lamp and down the strands that surround the central decoration. The dripping of oil creates the appearance of rain.
When the oil reaches the bottom of the lamp, it fills up a reservoir. The oil in the reservoir is then pumped back up to the storage area, and the oil drips back down again. This recurrent action is done by an electric pump hidden in the reservoir, and the oil travels up through a hose, which is hidden in one of the posts that keep the lamp together.