No, it doesn't really turn to fat. . .
When you stop providing a stimulus for large muscles for a long time, they will go down in size; the stimulus for large muscles is exercise, and when you stop exercising, you also reduce your caloric needs, as well. If you don't reduce your calories at the same time, you will start to get fat.
Your muscle loss itself will decrease your need for calories a bit, too; muscle is fairly active tissue, and having a lot of muscle will increase your "maintenance" calories. That's why people who weigh more need more calories per day (although fat is fairly inactive -- a 250 pound person who's mostly fat will have a lower daily calorie requirement than a 250 pound person with 100 pounds of fat.)
Lastly, the muscle itself will be supplying a small number of calories itself as it atrophies! But this is not really part of why some people get fat -- they above expain that. The muscles are involved in a natural day/night cycle of shrinking and growing.
During the day, when you're eating, the muscles tend to accumulate a little size. They replenish glycogen, but they also take up proteins, rebuilding themselves. Then, at night, when you sleep, you take on an overnight fast -- you're not eating. During that time, your protein levels and blood sugar levels will decrease. Your body will pull the necessary protein for bodily fuctions right out of your muscles. Also, the body always needs blood sugar to power your brain cells. If the blood sugar falls too low, the body will convert muscular protein to sugar in the blood.
So whether you're growing or losing weight right now, you have a daily cycle of muscles gaining protein during your waking hours, and losing it during your sleeping hours. If you exercise and get plenty of nutrition, you cause more protein gain during the day than you lose at night. But if you remove all growth stimulus during the day, you will fail to keep that excess muscle that you build (excess meaning "more than what the body needs, given what you do with it."
Also, if you go on a very strict, very low-calorie diet, your body will be consuming your muscles for fuel, day and night.
Side note: bear in mind that all that "size" is actually mostly water. The actual proteins and other "hard" material don't take up much space at all. Take a 1/4 hamburger, and then grill it for an hour. It's a feather-light briquet after all the water is gone and the fat has dripped out, right?
Many things that go in and out of muslces take a lot of water with them. For example, if you burn off your muscle glycogen (stored carbohydrate), your muscles will drop a lot of fluid. This happens at the start of a low-carb diet. When you start eating carbs again, the muslces will replenish with glycogen, and you will pick that water weight up again.
Similarly, if you take creatine, it is stored in the muscles with water; that's part of the "instant" weight gain in a shrot period from loading with creatine. But creatine actually enhance some muscle functions, improving the quality of your training and, consequnetly, they growth. All the same, if you later STOP supplementing with creatine, as your muscular levels drop off, you will lose some water weight. If you exercised and grew more tissue while you took creatine, you will keep that size, but you will still lose the associated water.
Sorry if this was more than you were asking, but the question of muscle size is always a loaded one!
