NYCMusc: It absolutely does hinder your absorption of fat soluble vitamins. There used to be a warning with the Olestra/Olean in that frequent consumers of the products could find themselves deficient in vitamins A, D, E, K, and beta-carotene.
This was compounded by the fact that olestra was used in junk foods, and the people that ate junk foods likely weren't supplementing their diet with fresh, raw sources of those vitamins from healthy foods.
In terms of how it works, I'm guessing that it binds to the bile salts that are released by your pancreas when your body detects a fatty meal is on it's way down the chute. By binding some of those free salts, your body will not break down (emulsify) the fats. They pass right through you.
On paper, it seems like a great idea, but if you're already eating a reduced calorie, low-fat diet, you could be jeopardizing your body's ability to perform a number of functions. As I mentioned, Vitamins A, D, E, and K are fat-soluble, meaning they can only be digested, absorbed, and transported in conjunction with fats. Fats are sources of essential fatty acids, an important dietary requirement. Fats play a vital role in maintaining healthy skin and hair, maintaining body temperature, and promoting healthy cell and membrane function. Surprisingly your brain is also a consumer of fats, and uses them to function.
So, if you're eating 30g of fat a day as a part of a reduced-fat diet, you wouldn't want to reduce that even further using orlistat (alli). See a nutritionist and ramp up a vigorous cardio program. It's better for your body.