Re: how does a cloud form its shape?

At a microscopic level, the "edges" of all clouds look the same - fuzzy. 
Let's bring it down to ground level and fog, which is really just a cloud 
with its base at the Earth's surface. When you approach a fog bank, no 
matter how thick, there is never an instantaneous transition from clear to 
socked-in. Sometimes it happens faster than others (or, more precisely, over 
a greater distance), but the cloud (or fog) density change is always 
noticeable.

The second part of your question is a bit more complicated. Clouds are the 
result of ascending moist air, and several mechanisms can form clouds. 

Orographic clouds are the result of air being raised by landforms, 
particularly foothills and mountains, These clouds are generally flat in 
form, though immediately near the mountains, they may be shaped by the wind 
to form lenticular clouds, which, by the way, make up a fair percentage of 
UFO reports because of their disk shapes. 

Any time air is raised gently, the clouds which form tend to be flat (or 
"stratiform"). These clouds occur in the summer with the passage of warm 
fronts, and in the winter because there is little surface heat to drive 
upward air motion. Stratiform clouds tend to be quite fuzzy at the edges, 
because the forces creating them are fairly weak.

The sharpest edges are seen on cumuloform clouds - cumulus and cumulonimbus. 
These clouds have sharp edges because they are formed very rapidly by fairly 
strong upward air movement. There is little time for the edges to diffuse as 
the column of air rises and continues to condense its moisture out. In 
powerful updraft events, the rising air slams into the base of the 
stratosphere, creating the easily recognized thunderstorm anvil. Its sharp 
edges occur because the air has nowhere to go but sideways, and usually at 
great speed.

Of course, these are the two extremes. Cool summer days or warmer days in 
other seasons may give us cumulus clouds which are ragged and diffuse at the 
edges, because there is enough air turbulence to counteract the weak 
updrafts which produce these clouds. The result is that they appear ragged 
at the edges.As well, transitional forms of clouds may appear, which are the 
result of gentle but uneven upward motion. Stratocumulus clouds are of this 
sort.

Hope this answers your question. A great site to visit is the Australian 
Severe Weather homepage at http://australiasevereweather.com/
which contains gobs of pictures of (of course) severe weather, but also 
hundreds of photos of clouds of every sort. It's a site no cloudwatcher 
should miss.