It is saturated . The ability of air to hold water changes depending on the temperature. Water gets into the air by evaporation or sublimation. Evaporation is changing from a liquid to a gas. To get the water out of the air it either condenses or sublimes.
Water needs a surface to condense on.
Particles that allow condensation to occur are called condensation nuclei . If condensation occurs at ground level, you'll get fog . If it happens above the ground you'll get clouds. Dew Point - the temperature at which water condenses. When the dew point is close to the current air temperature then humidity is high.