Mash and sparge

"Mashing"

Sort of tough to make this out, but if you peer through the steam you will see the grain bag soaking in the hot water.  Note the color change brought on by the steeping.  Once you reach your target temp (or a few degrees higher to account for adding room temp grain), you should turn off the heat and ideally leave it off during steeping.  I have heard some having trouble keeping the water temp up, but I had no problems.  My pot is very heavy, so this is probably why the temp remains pretty constant.  It is ok to turn the burner back on, but keep it very low in an effort to just maintain temp.  You also risk burning the grains if they are sitting on the bottom of the pot.

Once you have let the grains sit, you should pull the bag in and out of the concoction in your pot several times to extract more of the sugars.  You should then "sparge" the grain.  You can do this either by pulling the grains out above the pot and pouring hot (again 150-160 or so) water over and through the grains or by having another pot at the ready with heated water that you can slosh the grains through.  I chose the latter.  If you choose to pour the water over, many folks find dropping the bag in a colander and holding the colander over the brew pot is the best method.  When you are done with this, your concoction is now known as "wort".