During day time, on being heated, a large amount of water evaporates from various water bodies and goes into the air. A part of this water vapour also reaches the atmosphere through biological activities such as transpiration and respiration. This causes the air in the atmosphere to heat up.
When this heated air rises, it expands and cools, which results in the condensation of water vapour forming water droplets. The presence of dust and other suspended particles in air also facilitates the process of condensation. The formation of water droplets leads to the formation of clouds.