It's a way of getting water from the sky down to the ground. Once the water hits the earth, it can either be absorbed into the soil or runoff down the hill. Eventually runoff collects in underground aquifers or lakes and rivers. This sets the stage for the next step called evaporation. As sunlight heats up the water, it changes form.
Liquid water becomes water vapor.
This vapor then rises up into the sky. Water can also return to the sky through a plant activity called transpiration. Once in the sky, the water vapor cools down and forms clouds in a process called condensation. This step brings the cycle full circle when the clouds produce rain. In this way the cycle repeats itself over and over again.