This is an absolutely unstable atmosphere. It is characterized, of course, by cumuliform clouds. When the lapse rate is between the moist and dry adiabatic rates, things get interesting. Now above this the air cools at the moist adiabatic rate. Due to the release of latent heat, it cools more slowly than the air around it, which makes it warmer, lighter, and thus unstable.
Atmospheric stability does figure prominently in our considerations of weather.