There’s (almost) always some amount of water vapour (steam) just floating about in the air. 100% humidity means that the air can not accept any more water vapour, meaning any additional water that enters the air condenses as liquid, this is what fog and clouds are.
The amount of water air can hold depends on temperature, the hotter the air the more water it can hold. This is also why cold cans of drink will form a layer of water on them. The air around the can is cooled so much that the amount of water the air can hold drops below the amount of water already in the air, so that water has to condense as a liquid.
Same effect happens when you can see your breath on a cold day
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