I found these and thought they pertained to this post fairly well... sorry about the long post

"Let me explain, the typical weight loss program is based on a steady caloric reduction which enables the body to lose weight. Sounds good so far right? The problem is that no one ever bothered telling us what we were actually losing. Fat? Not entirely, when you decrease your caloric intake to or below your Basal Metabolic Rate (BMR), daily caloric requirement needed to maintain lean mass while only conducting involuntary activity (heart beating, lungs breathing, etc..), your body has to get by on less energy yet still do the same amount of work. It becomes even more counter productive when "voluntary activity"(exercise) is added yet caloric intake is still at BMR. When forced into this situation the body simply begins to "lighten the load." This means the body perceives that it is about to go into a state of caloric (energy) deprivation which prompts the body to begin rid itself of whatever material that most consumes calories. This material just so happens to be our lean muscle. "

"A very important use of % bodyfat measurements is to monitor the effect of diet and/or exercise on muscle tissue and fat. For example, research has shown that when a person goes on a typical fad diet, with little exercise, they lose as much or more muscle tissue than fat. (Scales will not tell a person that this is happening, but measuring % bodyfat regularly will.) Then, if this person goes off the diet and gains the weight back, they gain more fat back than they lost and less muscle tissue than they lost. The result is that they have more fat and less muscle than before the down-up cycle and are worse off than before the diet. Again, measuring % bodyfat will show this whereas scales will not.
There are many other things measuring % bodyfat can show. For example, a person who is much too lean, particularly women, may not realize this and scales will not tell them. There are studies which indicate it is harmful for women to drop below 10 to 12% bodyfat. And, of course, we all know the problem of Anorexic girls and women who do not realize, or refused to believe, they are much too lean. Regular monitoring of % bodyfat will show graphically and accurately that they are too lean and are also losing muscle and organ tissue with their inadequate nutrition intake. Positive proof of this through % bodyfat measurements can help convince them that they need a better diet, higher in calories and nutrition.
Another use for % bodyfat measurements concerns a much more common situation. This is the person who is the correct weight according to a height weight chart or even underweight according to these charts. They may also look reasonably fit when they look in a mirror and may think they are just fine. And yet, if they measure their % bodyfat they may find they have too much fat. Their small, under-developed, probably little used muscles account for their light weight. % bodyfat measurements will show them they are overfat and under muscled and they will realize they need to go on an exercise program with correct food intake to replace fat with muscle.
And yet another possibility is a very strong, muscular, athletic person. They may have a weight considerably above what a height-weight chart would say they should have. If they believe the chart they may think they have too much fat and have to lose weight when, in fact, their extra weight is due to large muscles. This person might actually be very lean and if they were to go on a diet and lose weight almost all the loss would be muscle tissue. Measuring % bodyfat would reveal this situation and show the person they were lean and that the extra weight was muscle and possibly even stronger bones which have a higher density. A scale cannot give this information. Only % bodyfat measurements will show this."