You can watch a short video about the process here! 

 Like all alcohol, moonshine is made though fermentation and distiliation. While wine is made by fermenting grapes, moonshine and other whiskeys are made by fermenting grains with sugar and yeast. Distilation is the process that sepertes the alcohol from the water and other substances in the fermentation chamber. 

Because alcohol evaoprates at a lower temperature than water, steam from the still is mostly alchol. When this condensed steam is whiskey.