Learn Italian: L'acqua è fredda; il vapore, invece, è caldo. - The water is cold; the steam, instead, is hot.

In Italian, it is very common and natural to place invece (instead / on the other hand) right after the subject you want to contrast, surrounded by commas. While you could say "invece il vapore è caldo", saying "il vapore, invece, è caldo" emphasizes the contrast between the steam and the water much more strongly.

How does invece relate to consequence words like quindi and perciò?

While quindi and perciò show a result or consequence (therefore / so), invece shows a contrast (instead / on the contrary). All of these are connecting words (conjunctions) that link two independent ideas. Notice how the semicolon (;) connects the two related thoughts here, acting as a bridge before invece introduces the contrast.

Why do fredda and caldo end in different letters?

Adjectives must always match the gender of the noun they describe. Acqua (water) is a feminine noun, so the adjective gets the feminine -a ending to become fredda. Vapore (steam) is a masculine noun, so it gets the masculine -o ending to become caldo.

I thought words ending in -e like vapore were feminine?