A funnel cloud is a funnel-shaped cloud of condensed water droplets, associated with a rotating column of air and extending from the base of a cloud (usually a cumulonimbus or towering cumulus cloud) but not reaching the ground or a water surface. A funnel cloud is usually visible as a cone-shaped or needlelike protuberance from the main cloud base. Funnel clouds frequently form in association with supercell thunderstorms.
If a funnel cloud touches the ground it becomes a tornado. All tornadoes begin as funnel clouds, but many funnel clouds do not make ground contact and so do not become tornadoes. If there is a dust cloud near the ground beneath the funnel or if the funnel contains dust or debris, rather than just condensed water, a tornado exists. Conversely, some tornadoes may appear only as a debris swirl, with no obvious funnel cloud extending below the rotating cloud base.
Todd Snyder sent me this photo. It was taken from just west of Calgary, Alberta.