A cloud is composed of tiny water droplets or ice crystals that are suspended in the air. A series of processes have to happen in order for these water droplets or ice crystals to form into clouds in the atmosphere, and different types of clouds form from different processes. The four main ways that clouds can form are:
All of these processes involve the cooling of air. Warm air is able to hold larger amounts of water vapor than cool air, so when air cools it is no longer able to hold all of the water vapor it was able to hold when it was warm. This extra water vapor begins to condense out of the air into liquid water droplets.
Typically, water vapor needs some sort of particle, such as dust or pollen, to condense upon. These particles are called condensation nuclei. Eventually, enough water vapor will condense upon condensation nuclei to form a cloud. The water droplets in the cloud may eventually fall down toEarth in the form of rain or snow (or other forms of precipitation).
source: windows to the universe