Steam is a gaseous Material that is created when water evaporates in contact with fire and in many other alchemical reactions. It collects in pockets in the ceiling and can restrict breathing, but just like Smoke is otherwise harmless.
It will naturally condense back into Water over time, raining down in small droplets.
It can be somehow collected into a flask, possibly since Epilogue 2 Update.
steam can be somehow collected into the flask