How does the condenser actually work?

I know it takes the water out of the hot air which has been over the clothes. I can guess that somehow this air is cooed so that the water has to come out (same as how rain is formed).
But is the dried air recycled, or does it spew into the room?
How much water is left in this "dried" air?
If cold air passes over the condenser it must be warmed up to get the hot air inside the condenser to cool. Is that air then in turn heater, passed over the wet clothes and then into the condenser so that it is cooled by new cold air coming in?
I want to know because if the "dried" air is not actually dry when it comes out of the drier it will make the room the drier is in very humid very quickly, and if the walls of the room are quite cool as they would be on a winter's morning the walls of the room will very quickly get mildew. Which I do not want

Any ideas on this one - anyone?

John
January 2005