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The polar lights, more commonly known as the northern lights, occur as a result of solar activity: the sun throws out a great amount of its substance, and in a few days it reaches the upper layers of the Earth's atmosphere, rich with nitrogen and oxygen. In the polar regions of the Earth this "interaction" becomes visible and appears as colourful lights in the sky...
360° photo: http://www.airpano.ru/files/Iceland-Polar-Light/2-2