Recently I started to notice that in some contexts, mostly crime-related the form "раён" is used instead of "район". Although the words are pronounced similarly, they are used in different contexts and with different prepositions: "в районе" but "на раёне".
Can anybody please clarify the difference?
It's a criminal slang. There is no difference other than that.
It's obvious that раён is incorrect, it's only used to emphasis the criminality of the speaker. But even на районе is sufficient.
ты с какого района? instead of neutral ты из какого района?
In many cases, mispelled word раён as well as the wrong combinations на районе, с района is used in an ironic way by the people who are not criminals or hooligans. Such writing and using of wrong prepositions are often used to emphasize IQ level of bullies/criminals, because there is stereotype that they are actually talking this way. Increased attention to the word "район" can be explained by the gopniks' catch phrases "Ты с какого района?" and "Сидим с пацанами на районе".
To summarize:
район - correct spelling, раён - incorrect
в районе - correct, на районе - incorrect
из района - correct, с района - incorrect
This is not a criminal slang (especially just the spelling "раён"), though it has "criminal roots". You can hear many people speak like that - taxi drivers, street sales persons, workers, etc. Most of them are not well-educated, so they do not know the right way to speak. Of course the criminals are also not educated, so when you imagine how criminals speak - they will certanly use incorrect forms of words and language constructs.
As for spelling "раён" sounds exactly as "район", so "ё" is used here to emphasize the incorrectness of the speech, especially in the expression "на раёне" (and most likely the person speaking so will spell it incorrectly).
As for "на" - this preposition is often used in argots instead of "в": "на зоне", "на больнице", "на тюрьме" (see this answer by Quassnoi).
