Cloud in a bottle
Even though you don't see it, there is water in the air all around us. This is called water vapour.
When you pump air into the bottle, the molecules inside are squeeze together (compress). It also raises the temperature.
Releasing the pressure by popping the top off allows the air to expand, so the temperature of the air becomes cooler.
This cooling means that the molecules can stick together (condense) more easily, to form little droplets. Clouds are nothing more than groups of water droplets.
The reason Ethanol (alcohol) forms a more visible cloud is because alcohol evaporates more quickly than water (it has a lower boiling point).
This means it has weaker bonds than water molecules, so they let go of each other more easily.
All of this works in reverse when you make the cloud disappear.