All atmospheric air contains some amount of water vapor. Now, consider the atmosphere as a giant, slightly wet, spunge. If we squeese that spunge very hard, the water absorbed will drip out. The same happens when air is compressed, which means the water concentration will increase. To avoid future problems in the compressed air system, the wet air needs to be treated. This takes place using an aftercooler and drying equipment. 
 
Why and how do we dry compressed air?
Atmospheric air contains more water vapor at high temperatures and less at lower temperatures. This has an effect on the water concentration when the air is compressed. For example, a compressor with a working pressure of 7 bar and a capacity of 200 l/s that compresses air at 20˚C with a relative humidity of 80% will release 10 liters/hour of water in the compressed air line. Problems and disturbances can occur due to water precipitation in the pipes and connected equipment. To avoid this, the compressed air must be dried.