Clouds are collections of droplets of liquid water or ice crystals. They form because air under less pressure expands and cools, and, by cooling, water vapor condenses to form either liquid droplets or solid crystals (this is the same reason why it gets cold in the mountains). The droplets and ice crystals are sufficiently small that the wind is sufficient to keep them from falling to the ground (when they get too big for this, it rains or snows).

Clouds are formed from tiny droplets of water and ice.The air all around you has water vapor in it. Water vapor is the gaseous form of water. You can't see water vapor but it exists where the air is warm. Air near the ground is usually warm because as the ground is heated by the sun, the ground in turn heats the surrounding air. When warm air rises, it becomes colder and as it cools, water that was once vapor condenses into droplets.

Have you ever noticed clouds near the tops of mountains? Those clouds form as air rises along the mountain and water vapor condenses.

This is a great question. Clouds are certainly fascinating and very important, and can be rather complex too. If you have any difficulty understanding what I've written below, feel free to contact me and I would be happy to further explain or answer any more questions of yours.

Clouds are composed primarily of water, air, and tiny dust particles called "aerosols".

Clouds consist of water in two states: liquid and gas. The gaseous state of water is called "water vapor," which is completely invisible and cannot be seen in the air. Water vapor is transmitted into the atmosphere from the earth, the oceans, or from living organisms through the process of evaporation (for instance, whenever you sweat or breathe, you are transferring water from your body into the atmosphere). During evaporation, water on the earth or in the oceans is heated up and the hottest water molecules escape from the liquid state and are released into the air as a gas forming water vapor. If a body of air with water vapor in it is heated up, then it will expand and become less dense (or lighter) and rise to a higher altitude. A body of air can only hold so much water vapor before it becomes full, or "saturated." The warmer the air is, the more water vapor it can hold.

As a warm body of air rises, it begins to cool and therefore the amount of water vapor it can hold decreases. When the amount of water vapor that a cooling body of air can hold equals the actual amount of water vapor inside that air, then some of the water vapor inside the air begins to condense back into liquid form, creating tiny droplets of liquid water mixed in with the air. The temperature at which the air is saturated with water vapor and begins to form water droplets is called the "dew point" or "100% humidity." These tiny droplets of water are what cause cloud formation.

When you are looking at a cloud, you are actually seeing the light that is reflected off from billions of tiny droplets of water in the air. In order for water vapor to condense into liquid water droplets in a cloud, the vapor needs to collect around tiny dust particles, called aerosols or "condensation nuclei." Every water droplet in a cloud has a tiny dust particle at its center. When the water droplets in a cloud become too large to remain in the air, they form rain or "precipitation" that returns the water back to the Earth. This process -- evaporation of water, heating of air, lifting of air, cooling of air, condensation of water, and precipitation -- constitutes what is known as the "water cycle", which helps to transport water across the globe as an important part of the weather.

It is important to note that this is only one of the many ways in which clouds form. For instance, another way that clouds form is when a body of air meets a land feature such as a mountain or plateau that forces the body of air upwards, causing it to cool and condense. For a description and explanation of the various ways in which cloud formation occurs, you may find the following website useful:
physical geography.

Note that in every method of cloud formation, the key process is the same: a body of air with lots of water vapor cools, causing it to become saturated and forcing the excess water vapor to condense around tiny particles into liquid droplets suspended in the air. These droplets create the cloud. The difference between the methods of cloud formation is the manner in which the cooling of the air occurs.