Diet can mean two very different things; one meaning is something we do in order to lose weight, a set of rules to follow to this end, a second meaning is a general eating habit, which will be different for each person.
People generally diet for one of a couple of reasons, they either want to lose weight (slim down) or they have a health issue that requires better eating habits.
When you diet to lose weight, you need to ask yourself one key question, am I losing weight to weigh less or to slim down? This question is so important it determines how you will approach your diet. I've seen way too much dependency on the bathroom scale from dieters and not enough on how well their clothes fit or how they are toning up. This can lead to multiple problems; the biggest of which is you could lose as much muscle as fat. If the purpose of your diet is to slim down and look better then judging your success solely by the bathroom scale will only prove a hindrance to your ultimate goal.
This is why I have such a big problem with so many of the fad diets that exist out there, they can help you lose weight but they can also be very unhealthy. When a diet calls for a great reduction in the amount of calories you eat every day, such as the cabbage soup diet, or require you to cut out a large chunk of your daily diet, such as Atkins does, you can run into health problems and a very poor quality weight loss, one that when the diet is over, you are very likely to just gain all the weight back that you worked so hard on losing.
How Weight is Lost
Let's cover briefly how weight is lost, and by weight I'm talking about fat, not water weight (which is all too common). Fat is just excess energy stored for later use, so to lose weight basically all you have to do is provide your body with less energy than it wants. So, by depriving your body of calories (the energy that it uses to run) you will force it to pull energy from other sources, including fat and muscle. This is where a bit of exercise comes into play. Yes, you can lose weight without any real activity however you will be more likely to lose more of the weight from muscle loss, this is a poor quality weight loss, it won't help your toning, and in the end will only slow your progress.
Losing muscle during weight loss will severely hinder your weight loss progress. The act of having muscle means your body needs to burn calories just to keep it alive and around. So if you not only keep the muscle you have but actually add to it a bit your body will need to burn more calories every day just for upkeep, thus helping you continue to lose weight. Keeping your muscle and even adding a little is very beneficial to your weight loss goals. Just having muscle requires energy, so, allowing your body to lose muscle will decrease the amount of sustaining calories your body burns and thus will make it more difficult to continue to burn off fat, creating a weight loss plateau.
So as much as we hate to do it, exercise is critical in losing weight, so do it. Find a partner, find a sport or activity, anything you can do to keep that muscle around will greatly assist you in achieving your weight loss goal.