You lose fat when you make your body burn fat. If you eat more calories than you burn in exercise and other activity, your body stores the excess energy as fat. When you burn more calories than you eat, your body burns that fat to make up the difference. The burned fat is gone, and you lose weight.
Some fashion models, bodybuilders and combat athletes use plastic wrap and similar methods to create a watertight barrier on their skin while working out. This establishes a humid environment in the covered area, raising the local temperature and making the athlete sweat more.