The smoke particles form the base on which the cloud forms. It represents the particles of dust, dirt and polution in the atmosphere. The water in the bottom of the jar is the moisture that the cloud needs to form. Think of it as the water cycle in a jar.
When you put the flashlight up to the jar the light adds some heat to the inside of the jar. Also the smoke particles from the match adds heat to the jar. This causes some of the tape water to evaporate. When you press down on the rubber balloon sheath you are creating the molecules of water vapor to get close together (high pressure). When you pull up quickly on the balloon sheath it causes the molecules to spread apart and get cooler (low pressure). This rapid cooling causes the water vapor in the jar to loose energy and condense on the smoke particles. This is what makes the cloud or fog appear.
Send questions and suggestions to: pdukerich@aldine.k12.tx.us