ANSWER: HCG causes your hypothalamus to mobilize the stored fat in your body. During the phase where you are consuming only 500 calories, your hypothalamus continually releases stored fat which your body burns for fuel. You are actually running on 3500-4000 calories a day, which is the equivalent of burning 1-2 pounds!
Hunger is common during the first few days. With any calorie restriction diet, hunger is natural. In most cases the smaller servings can be completely satisfying. This is partly due to your hypothalamus adjusting your metabolic rate, but largely due to the amount of calories circulating in your system from the fat being released.