As warm air rises the pressure drops, since there is now less air pressing down on it.
This allows the air to expand, causing the temperature to drop.
Once the temperature drops enough, the water gas condenses, forming fine liquid drops.. the mist of a cloud.
Since this temperature change is strongly influenced by height, this transition occurs at a specific height, giving you the flat bottom.
You can get a flat top, when the cloud rises high enough to strike the stratosphere, the next layer of the atmosphere.
Furthermore you can get a line if clouds, as a warm air and cold air front meet, again forming a sharp transition point.
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