Basic Funnel Cloud Definition
A funnel cloud is defined as a funnel-shaped cloud that is rotating and extending downward from the base of a convective cloud, but is not in contact with the ground. In other words, nothing is going on at the ground level in a true funnel cloud situation. Trained severe weather spotters know that they either have a funnel cloud or a tornado.
In the weather world, there is no such thing as a funnel cloud on the ground, nor is there such a thing as a tornado aloft. Since there is no such thing as a tornado aloft, we can say, by the same token, tornadoes don't 'touch-down.' In other words, they spin up. You either have a funnel cloud or a tornado with respect to relaying severe weather reports back to the NWS. In other words - the funnel cloud isn't the tornado if you understand the drift of this discussion.
A tornado may or may not have an associated condensation funnel (what you see with your eyes). That's right - you can have a tornado with no visible condensation funnel - the tornado can develop before the condensation funnel (most people still refer to the condensation funnel as the funnel cloud)!
Below is a funnel cloud picture. The funnel-shaped cloud feature was rotating, but there was no contact with the ground and no damage was observed at ground level. In this picture, the funnel cloud is rather fat or wide. In other cases it may be narrow and skinny. Many true funnel clouds develop under or near a rotating wall cloud. However, a funnel cloud can develop under other parts of a storm or convective cloud with no rain.