Velogirl was right on with her description of how bioelectrical impedence works and the only thing I would add to her excellent post is that, for those that want to watch the trends of their measurements, bioelectrical impedence is just one way.
As a personal trainer I have to work with a lot of different personalities that want to chart their results in different ways. For those obsessed with scale weight numbers I suggest weighing no more than once weekly. For others, they're satisfied with my caliper measurements taken at the end of each of their "terms". Others need to either rely on monthly inch measurements...and the best measurement...a pair of barometer jeans. Those jeans that fit best when you feel fittest! Try them on weekly. (Jeans are just an example. Use whatever clothing you deem as your barometer).
BMI isn't extremely useful in real life due to the difference of muscle to fat ratios. In fact, I believe it's in the same range as using scale weight as a measure of fitness.
Still, if you're looking to change your body composition, re-read Velogirls post, and seek the downward "trending" of whatever measurement method you choose.
Or...(a personal plug), hire a Personal Trainer or Nutritionist to guide you on your particular journey.
Vertically challenged, but expanding my horizons.