Actually a really good question. So here is my short answer (not): As the air is compressed it get super hot and hot air holds more moisture than cold air. Hence the drain on the bottom of the tank. Most people put a moisture trap right near the the compressor tank outlet. That is actually not the best place as the air is still quite hot (assuming almost constant operation or rapid on and off cycles). Anyway, the water separator does what it can and removes the moisture from the hot/warm air coming from the tank. Now if you are running a spray gun after a 100' of hose, the air gets a chance to cool down while moving through the hose. Cool air hold less moisture so water drops out. You notice it when running a DA or a grinder that uses a lot of air. Water starts to spray out of the tool's air discharge. Not the best for the tool but mostly annoying. But if you are spraying paint it causes a huge problem. A few drops of water trying to mix with your paint can cause solvent pops. Then there is the pressure drop issue at the tool/spray gun. As the air expands to a lower pressure, it becomes cold (based on the Joule-Thomson Effect) and its ability to retain moisture is reduced. The moisture is released from the air in the form of fog. Not good when trying to lay down paint. Back to the Wort Chiller. The delivered air is run through the chiller and cooled to a temp below what it will ever be in the hose or when released at the spray gun. The two separators remove the moisture from this ice cold air (as cold as it will ever get). Once out of the chiller the air can only warm up, and warm air holds more moisture; so, the warmer air getting to my spray gun has no water to give up. I use the moisture trap/dryer/filter at my spray gun just in case I fill both traps at the tank before I notice. Problem solved!
