Lightning occurs when electrostatic charges build up in clouds and are then discharged, similar to how you can get a shock from touching a door knob after shuffling your feet on the carpet.

How a charge becomes charged is still an area of active research, but we do know that the top of the cloud becomes positively charged while the bottom of the cloud becomes negatively charged. Two processes that play a role in creating this charge separation are the friction of colliding droplets of water and ice in the cloud and freezing. As the millions and millions of water droplets and ice particles whirl about in the cloud, they collide with rising moisture and in the process knock off electrons (negatively charged particles), leaving the rising water droplets positively charged. The knocked off electrons gather near the bottom of the cloud producing a negative charge, while the positively charged droplets rise toward the top of the cloud. As water droplets rise, they encounter colder air temperatures and start to freeze. The frozen portion of the droplet tends to acquire a negative charge while the unfrozen portion tends to acquire a positive charge. Air currents can rip off the liquid portion of the water droplet and carry it to the top of the cloud while the frozen portion falls toward the bottom of the cloud. Thus the cloud becomes even more polarized (positive charge at the top, negative charge at the bottom).

This separation of charges creates an electric field that repels the negatively charged electrons at the surface of the earth away from the negatively charged bottom of the cloud (because opposite charges attract and like charges repel each other). This creates a net positive charge at the surface of the Earth.

Once the electric field becomes strong enough, it will strip electrons from the air molecules, creating a soup of positively charged ions and negatively charged electrons called a plasma. Normally air is an insulator (that is, it does not conduct electricity, think of the plastic material on the outside of an electrical cord), but the ionized air is a conductor of electricity (think of the copper wire inside the electrical cord). Once a conducting path of ionized air has formed between the earth and the cloud, electrons will flow rapidly along this path to neutralize the charge build-up. This is the lightning strike. This rapid discharge of electricity heats the surrounding air to temperatures hotter than the sun, producing the bright light we see. This heat also causes the air air to expand violently, creating a shockwave; this is thunder.