Ketosis refers to a metabolic state where your body is burning fat instead of its preferred fuel of carbohydrates.
Carbohydrates exist in two forms when you are eating normally -- "free" or accessible carbs and stored carbs called glycogen. When your body needs fuel, it will burn the free carbs first (like if you drink a glass of OJ full of carbs). When all the free carbs are gone, your body will burn the stored carbs (glycogen). Glyogen is stored within your muscles, and contains carbs and water stored together. Once the glycogen and stored water is gone, your body turns to fat and some smooth muscle to burn.
Remember that in the first week of this diet, you will lose a lot of weight. Most of that will be as a result of using up the glycogen, because every gram of stored carbs ALSO stores 3 grams of water. If the glycogen is used, the water is released. Result? Large weight loss.
This is ALSO why, if you have a high carb meal, your weight goes UP UP UP. Every extra gram of carbs will be stored with an extra 3 grams of water. This is why if you eat 1lb of chocolate, your weight goes up by 4lbs (at least! 1lb carbs + 3lbs water).
When your body burns fat as fuel, ketone bodies are produced and are released in your urine, sweat, and saliva (hence the bad breath and BO that some MFers report). The more fat that is burned, the higher the concentration of ketone bodies, and the greater the odor!
Medifast is a diet that produces a MILD ketogenic or fat-burning state. This is because to be in SERIOUS ketosis, like the Atkins diet produces, your carbs should be limited to less than 20g per day. We are eating between 80 and 100g -- JUST enough to keep your brain functioning and JUST enough to put you into ketosis.
You will KNOW that you are in ketosis IF you have been 100% ON PLAN for 3 days. This is because your body only stores enough glycogen to provide fuel for 3 days. Once the glycogen is GONE, after 3 days, you will be in ketosis.
NOW, my breath has never smelled, and my BO is normal, so I am in a mild state of ketosis and lose fairly slowly. OTHERS burn lots and lots of fat and because of this, they are in a heavy state of ketosis and their breath and BO smells accordingly.
Bottom line? To be in ketosis, you need to be 100% on plan. If you aren't, you will lose weight but much more slowly because the more CARBS you eat over 100g, the less BODY FAT your body will metabolize as fuel.
ALSO, if you eat a really HIGH FAT diet, and cheat on nuts or something (no carbs, high fat), you WILL stay in ketosis BUT your body will metabolize the FREE fat from the nuts because it is more easily accessed than your stored body fat.
Note also that alcohol is metabolized as FAT, so if you have a glass of wine, you will stay in ketosis but your body will use the wine as fuel instead of your body fat. Result? SLOW weight loss.