Evaporation is a phase change of a liquid to a gaseous state. It occurs when molecules in the liquid have enough kinetic energy to escape the surface of the liquid - therefore it is a surface phenomena, not to be confused with the volume phenomena of boiling. Evaporation is a cooling mechanism because the escaping molecules require heat from the rest of the liquid, thereby leaving the remaining liquid cooler. This is used by the human body in the process of perspiration in order to cool people down which can be read about on Hyperphysics.
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