The answer is.... Its in your muscles, in your blood, in your bladder, in your digestion.
You know just after you work out, you get that 'pumped up' look that leaves you looking toned and fit? its all water. Sorry to breack the bubble! It dies down after a few hours, ends up in your bladder eventually but not before feeding all the other parts of your body that have been working out.
You also breathe alot more when you work out too. If your hot, there is more water in the vapour and this you also lose water this way.
Then theres the digestion, food you eat, bad stuff your body wants to get rid of, it all needs water to aid it and water to get rid of what is left over.
It all adds up. I don't doubt the body holds onto some of it. I have water retention at the best of times, always have ankles with indents in them where I have been leaning, if I lean on something I get a red indent where I have lent...all water retention signs which never seem to go away. I would think the water I drink also fills in here. I don't know about you but water retention makes a difference to me also.