Concept:
Dispersion is the splitting of white light into its component colours.
White light is made of seven colours:
\[
\text{Violet, Indigo, Blue, Green, Yellow, Orange, Red}
\]
This sequence is commonly remembered as:
\[
\text{VIBGYOR}
\]
A prism is commonly used to show dispersion.
Step 1: Understand why white light splits.
Different colours of light have different wavelengths.
The refractive index of a material is slightly different for different wavelengths.
So different colours bend by different amounts when passing through a prism.
Step 2: Role of prism.
A prism has two refracting surfaces inclined to each other.
When white light passes through the prism, each colour deviates by a different amount.
This causes the white light to split into a spectrum.
Step 3: Check the options.
Option (A) glass can refract light, but the standard instrument to observe dispersion clearly is prism.
Option (B) mirror reflects light; it does not produce dispersion.
Option (C) water can show dispersion in some cases, like rainbow formation, but the standard answer is prism.
Option (D) prism is correct.
Hence, the correct answer is:
\[
\boxed{(D)\ \text{prism}}
\]