I am creating an outdoor scene and need to create 3d clouds. What is the best way to go about this in blender cycles. I know you can't use the cloud generator addon since cycles doesn't have support for volumetric shading. Any help is apreciated.
Since the initial commit in January 2014, cycles has had volume support.
You can get a development version or any version newer than 2.70 to use it.
To render clouds with it, try sculpting a cloud shape (dynamic topology is useful) or modeling a low poly cloud with a subsurf and a displace modifier:
Smoke simulations look better, but will require more computation time to be baked.
For the cloud material, use a volume scatter node:
Make sure you set the scattering bounces pretty high in Render settings > Light paths if you want bright, fluffy clouds.
Node setup. Absorbtion and an extra mix node (0.2 to account for 0.8 reflectivity) can help darken the bottoms a bit, but is entirely optional.
Clouds scatter preferentially forward, but simply raising the anisotropy will not accurately simulate the way the light scatters. You will need 3 separate volume scatter shaders and 2 mix shaders to get a fair approximati. Leave the color (preferrably connect the color inputs to an RGB node) the default 0.8 because water clouds reflect 80% of the energy that hits them. To get edge feathering, use a mapping node, select values less than 1 in the scaling field (the smaller the number, the less "fuzzy" the edge gets), and combine it with a sphere gradient texture, and combine that with a noise texture to simulate the density variations (the best results would come from making your clouds from clumps of individual sphere meshes, which can be done quickly by using a particle system).
Scatter Shader 1 Anisotropy: 0.9 Description: some of energy is concentrated in a 10 degree cone, creating the "silver lining:
Scatter Shader 2 Anisotropy: 0.250 Description: the rest of the forward scattered energy is scattered in a 90 degree cone
Mix Shader 1 Fac: 0.52
Scatter Shader 3 Anisotropy: -0.38 Description: There is sudden peak of backscatter over a 40 degree cone, facing the light source. This is responsible for you seeing the cloud despite it scattering most of the light forward, and why the shadowed side is darker.
Mix Shader 2 Fac: 0.48
This is not a fully accurate simulation. You would need Metropolis Light Transport to simulate the fogbow/cloudbow and glory. There is an MLT Patch for cycles but I do not think it supports volumes yet.