If we do the right exercise we will burn up calories during the exercise and continue to use up fat reserves after our exercise session.
But this is only partly the explanation; it is also believed that exercise plays an important part in improving a person's psychological outlook, it makes them feel good.
We definitely know that exercise stimulates an endorphin rush which makes people feel good when they complete the exercise, but also it's believed it helps improves somebody's self image, i.e. what they think about themselves.
This principle is also quite simple to understand. If we feel good about ourselves then we will naturally want to look after ourselves, we will take care to exercise and eat well.
On the other hand if we don't particularly like ourselves then the chances are we won't feel the need to take care of ourselves. This is obviously a subconscious response but nonetheless very powerful.
Think about it like one of our possessions, for example a car or garden. When we place a lot of value on them then we look after them, we clean our car and weed our garden. If we didn't like them we are likely to let them go to pieces and consequently the car would begin to rust and the garden would get overgrown.