Rayleigh Fading and Rician Fading

Rayleigh fading is a reasonable channel model when there are many objects in the environment that scatter the radio signal before it arrives at the receiver.

The central limit theorem holds that, if there is sufficiently much scatter, the channel impulse response will be modeled as a Gaussian process irrespective of the distribution of the individual components.

The Rician K factor, defined as the ratio of signal power in dominant component over the scattered, reflected power, which shows in the below figure is a easy way to understand the behavior of a short-range wireless channel.

Short conclusion : 

1. Rayleigh fading is most applicable when there is no dominant propagation along a line of sight between the transmitter and receiver. 

2. Rician fading is used while there is a dominant line of sight. (Which is usually used in short-range wireless channel)