Q: How exactly do pearlescent pigments work?
A: Pearlescent pigments produce an iridescent effect, which is caused
by the refraction of light into individual wavelengths of the visible
spectrum. When light travels from one transparent or translucent medium
into another, it bends due to the change in the medium's density. If
the angle of incidence is such that the wavelengths are split, then the
individual colors of the spectrum can be observed, much in the same way
that a prism splits light.
One example of this is an oil slick. Light is transmitted through
individual oil droplets to the surface of the water, reflected back
through the oil, and then refracted, with each oil droplet acting as a
minuscule prism.