Ketosis is a fat burning state so what does get burned off during ketosis will be fat (or muscle) - what it really means is that your body has nothing left to burn other than it's own supplies. This happens when the liver is deprived of the stores of glycogen it usually keeps around as fuel.
Does being in ketosis automatically mean you'll be losing weight? Yes and no. Weight loss can stall while in full ketosis for any number of reasons, and on a diet like Atkins your carb/cal intake is never going to be identical every day so there's no way to expect consistency. Even if you did have an identical intake, fluctuations in your body chemistry mean you might lose three pounds one week and stay the same 'the next.
What ketosis guarantees is that the fat you burn will be body fat. It doesn't guarantee weight loss every week, though it does highly increase the likelihood of it.
Frustrating, eh.