Clouds are formed when moist air rises upward. As the air rises, it becomes colder. Eventually the air can't hold all of the water vapor in it, and some of the water vapor condenses to form tiny water droplets. When moist air is cooled at the ground, fog is formed in the same way.
Clouds form at a wide range of altitudes, from near the ground to very high in the atmosphere. The appearance of clouds varies a lot, depending on the motions of the air as the clouds are formed. Other important things to observe about clouds are the percentage of the sky they cover, where they are located in the sky, how much of the sky they cover, and their direction of movement. A good way to find their direction of movement is to stand under a tree branch or an overhang on a building and watch the clouds move relative to that stationary object.