Turns out that the impacts of water vapor and water droplets in the air pose some of the biggest unknowns when it comes to understanding global climate change. This picture of sunset over Bogue Sound, North Carolina, taken this past Saturday evening, makes clear that water droplets, that is, cloud, blocks sunlight, reflecting it back into space and preventing it from warming the earth. However, water vapor, which does not form cloud, acts as a powerful greenhouse gas, transparent to sunlight just like the glass window on a greenhouse, but absorbing the heat produced by that sunlight when it hits the earth's surface. As the earth warms, more water of course evaporates. The big unknown concerns what will happen to all that extra water vapor in the air. Will it form more clouds, blocking sunlight and providing for a net cooling effect on the earth? Or will that extra water vapor stay in the vapor phase, that is, not form more clouds, allow sunlight to reach the earth's surface, and hold in the resulting heat making the earth even warmer? This latter possibility goes by the term, positive feedback loop. Warmer temperatures cause more water evaporation - in turn the greater amount of water vapor, though transparent to sunlight, holds in the heat generated by that sunlight, and causes the earth to get warmer still - in turn causing more water evaporation, over and over and over.
Climate scientists have long considered this issue, as you can read at RealClimate.org. At least one recent report suggests that the positive feedback loop may predominate, see Strong evidence that cloud changes may exacerbate global warming