Clouds form when warm, moist air rises from the surface, cools, and the invisible gas-state water it's holding condenses into liquid water. That's all a cloud is, after all: a bunch of tiny water droplets that are so numerous, you can see them from the ground.
The thing to understand is that air on earth always has at least some water in it. Most of it is gas-state water, known as water vapor which is invisible. Warm air, in particular, usually has plenty of this invisible water vapor hidden inside it. But the thing about air is that as it cools, it can't hold onto as much of that invisible water. So, the water vapor condenses and becomes liquid water---a cloud. Again, it all has to do with warm air rising from the surface into a cooler environment and then condensing its water vapor into water.
There is a technical reason why air cools as it rises. For those who are interested, check out the topic, Why does rising air become cooler?
---David Murphy
