Normally, they are far too faint to be seen, but they can be visible when illuminated by sunlight below the horizon. As with normal clouds, ice crystals within noctilucent cloud systems need two things to grow; water and something for the water to adhere to, usually dust. While ordinary tropospheric clouds get their source of dust from things like desert storms, this is not a viable medium in the mesosphere where this dust simply cannot reach. Accordingly, it is speculated that these cloud formations utilise dust particles from outer space.
As for the source of the water vapor necessary to produce clouds at such extreme altitudes, upward winds during the summertime are capable of carrying water droplets from the moist lower atmosphere toward the mesosphere. That's why noctilucent clouds only appear during the warm summer months.
For more information see: http://science.nasa.gov/
Picture courtesy of Science Photo Library.