The structure represented in the diagram is of Nephron. Part 1 shows Bowman's capsule which encapsulates the glomerulus and part 2 shows collecting duct. The fluid that comes to part 2 i.e. collecting duct, is called urine.
The three mains steps involved in the formation of urine are:
1. Glomerular filtration or Ultrafiltration: The blood passes through glomerulus which is a bunch of capillaries encapsulated by Bowman's capsule and due to high blood pressure in the capillaries of the glomerulus, the blood pressure forces out the water and dissolved blood components through the filtration membrane. The resulting fluid is called filtrate or glomerular filtrate
2. Selective reabsorption: From the Bowman's capsule, the glomerular filtrate enters the Proximal Convoluted Tubule or PCT. About 65% of the glomerular filtrate is reabsorbed in the PCT. These include glucose, amino acids, vitamins, hormones, sodium, potassium, chlorides etc.
3. Tubular secretion: The substances that are not reabsorbed in the selective reabsorption excrete into the filtrate by the process of secretion. Tubular cells secrete substances like H+, K+ and ammonia into the filtrate.
Urine is mainly formed by the tubular secretion of urea, creatinine and mineral ions.