Wall clouds form at the base of a storm's updraft.  This wall cloud is difficult to distinguish from other low hanging clouds like scud.  However, to make the distinction, a spotter should watch for signs of upward motion within the cloud (ragged scud clouds like those featured on the left are particularly easy to observe upward motion).  Also, many wall clouds rotate slowly counter clockwise.  If you observe a cloud feature like this one which is slowly rotating and has embedded upward motion, it is likely a wall cloud and could produce a funnel cloud or tornado.  Once you realize you are seeing a rotating wall cloud, you should relay your report to the NWS as soon as possible, and watch closely for the development of a funnel cloud or tornado.  The most likely spot for tornado formation will be within the most rapidly rotating portion of the wall cloud.