OK let start with the myths; woman don't make enough Testosterone to gain significant amounts of muscle, so no matter how hard you train unless your on Testosterone supplements you wont get a 'body builders' body. In fact most pro-female 'builders' are on testosterone and have been training for 5+ years to build up the muscle. That and they are in the mid teens of body fat percentage.
Don't be afraid to putting a bit of muscle on as its more compact that fat (you will look more defined) and its metabolically active - you will burn energy just by moving around normally. Also Hypertrophy (building muscle) is very dependent on protein intake in the same way that eating lots of fatty foods = more body fat. Lots of protein = more muscle, controlling your protein intake will stop you from gaining muscle bulk.
As previous posters have mentioned diet and exercise and two sides of the same equation. If you want to cut fat most effectively you can cut dietary carbos and burn more energy. Take a log of everything you eat over a 2 week period then go back and check the food labels, cut the foods that contain lots of sugar (high glycaemic index), and fat that is solid at room temperature (saturated fat), starchy foods like white bread/rice can be cut too. Replace, yes REPLACE them with fibrous food such as brown rice, baked potatoes brown/granary bread - the fibre will stop you feeling hungry and slow the release of energy.
Ok on to exercise, you need both cardio and weights, its a myth that you cant lose fat by lifting, if fact you can burn more energy by lifting b/c with of the big compound movements your using more muscles that just doing the rowing machine etc. Also don't be afraid to lift heavy, you can develop strength independent of muscle bulk. Make sure that you consult a personal trainer/gym coach to get the workout for your body type - remember everyone is different so what works for one person may not work for another.