You need to get the balance right, as motherof2 says... but yes, being thoroughly hydrated makes the body work at it's most efficient. This means your metabolism is working at it's optimum level, all your organs... everything! And this aids weight loss...
It varies from one individual to another though, of course, so the best course of action is experiment a little, and find your perfect amount. The LL guidelines say to "drink 2.25lts a day, and this can include your packs"... But many dry to drink that in addition to the packs... It's personal choice...
I drink about 5lts in total per day (which includes the water from my packs) and I feel that's right for me...
Regarding the way to drink the water (yes, there is a
way to drink it too! hehe), sipping small amounts continually throughout the day is the best way for your body to benefit most from the water.
Imagine your are a water wheel, and you want to keep the wheel turning gradually throughout the day, with a drip feed of water. Drinking large amounts in one go, then having nothing for an hour or 2 is not nearly as effective... Hope that helps... and good luck!
xx