1: It burns calories.
2: It prevents eating: This may sound stupid, but a person engaged in exercise is generally unable to eat at the same time. Here's a more concrete example: A 54 year old woman who used to eat fast food with co-workers at lunch decides instead to walk for that hour. Not only does
her weight benefit from the calorie-burning caused by walking, but she is no longer able to spend the time consuming high fat food.
1: Increased resting metabolic rate. Nearly all exercise seems to increase resting metabolism to at least a small degree. Generally resistance training (weight lifting) seems to increase resting metabolic rate more than aerobic activity, but both forms help.
2: Appetite Modulation. For several hours after, exercise suppresses appetite and also seems specifically to reduce fat craving. Some of this effect may be related to the "natural high" of exercise that causes a change in brain chemistry.
3: Exercise Increases the Thermic Effect of Food. Studies show that regular exercise increases the percent of calories in a meal that the body burns during digestion.
4: Exercise Elevates Mood. Because people who exercise feel better, they are more likely to stay motivated to make all the lifestyle changes needed for weight loss.
5: Exercise Improves General Health: People who exercise are prone to fewer and milder illnesses than those who do not. This means less "down-time", and a lower chance that illness will 'de-rail" a person's weight control program.
The "snowball" effect whereby physical condition resulting from exercise makes further exercise much easier.