The initial nucleation of Ge nanoclusters on Si(110) at room temperature (RT), annealing-induced surface roughening and the evolution of three-dimensional Ge nanoislands have been investigated using scanning tunneling microscopy (STM). A few monolayers (ML) of Ge deposited at room temperature lead to the formation of Ge clusters which are homogeneously distributed across the surface. The stripe-like patterns, characteristic of the Si(110)-'16 x 2' surface reconstruction are also retained. Increasing annealing temperatures, however, lead to significant surface diffusion and thus, disruption of the underlying '16 x 2' reconstruction. The annealing-induced removal of the stripe structures (originated from '16 x 2' reconstruction) starts at approximately 300 degrees C, whereas the terrace structures of Si(110) are thermally stable up to 500 degrees C. At approximately 650 degrees C, shallow Ge islands of pyramidal shape with (15,17,1) side facets start to form. Annealing at even higher temperatures enhances Ge island formation. Our findings are explained in terms of partial dewetting of the metastable Ge wetting layer (WL) (formed at room temperature) as well as partial relaxation of lattice strain through three-dimensional (3D) island growth.