After it is gone or very scarce, your body resorts to the bodyfat, but only after the muscle is gone. Your body needs fat. It may come as a surprise, but the bodyfat cushions your organs and keeps body heat so you will be warm. Now, when you have TOO MUCH bodyfat is when you should start worrying. You also need protein.
Protein helps build and repair new muscle fibers after a workout or exercise.
Of course, this doesn't mean don't eat less calories. For instance, a carrot is much healthier than a candy bar, and has less calories. They are both equally filling. The carrot, of course. Try to replace your fatty and unhealthy foods with leaner foods, and you will automatically reduce your caloric intake, without even knowing it.