Mud Volcano is dominated by the vapor that is produced at depth and rises to the surface through fractures. This vapor can be seen bubbling through the mud pots. The limited water at the surface is supplied from condensaton of the steam and shallow groundwater from rain and snowmelt. The mud is produced as the hydrogen sulfide gas, water, and bacteria chemically weather the rock and the restricted water flow is not sufficient to move the resultant mud particles out of the area.

The Mud Volacano area is close to the point of maximum uplift and then sinking of the caldera floor. The intersection of several faults provides the structure that makes the hydrothermal system possible. Temporal changes in the activity of the hydrothermal system appears to reflect changes in the seismic activity in the area.