How They Work
Condensing systems have a second heat exchanger and are designed to loop exhaust back through the system before releasing it. These gasses aren’t especially hot (usually around 100 degrees), but as they pass through the secondary exchanger, some of their heat is transferred to incoming cold water. The water then passes through to the main heat exchanger where it achieves the desired temperature using far less energy.
A nice little side effect of recycling the exhaust is that it causes vapor to form, which then cools and condenses to be recycled back into your water supply. This can help a little with your water bill, but also proves to be this system’s weakness.