1 - 2 lbs sounds like a little bit; try thinking of it in terms of percentages. And yes the bulk of what you lose at first is water as you rid yourself of the carbs and glycogen ( 1g carb will retain 3g of water). Fat is lost, and unlike a low fat low calorie diet you are not going to lose lean muscle mass, so you'll notice that youre shrinking even if the scales do not budge. Take some measurments, they will tell a more accurate story than the scales.

Nat