I just recently had a fitness test done, and I too was surprised that the amount of fat burned as exercise increases goes down. Based on what the trainer said along with additional research, this is how I believe the process works:
At most exercise intensities, the body burns a combination of fat and carbs (plus a small amount of protein, but the amount is much less than the other two nutrients during most activities). The rate of each is determined by a number of factors, but the two most important are exercise intensity and level of fitness.
As you start to exercise, your number of calories burned increases in proportion to your heart rate. The amount of fat calories burned, however, looks more like a mountain for most people. As intensity increases, your rate of fat burned also increases, but eventually, your body's aerobic system can no longer keep up, so the body starts to use the anaerobic system. During this process, the anaerobic system produces lactic acid. Some of this lactic acid gets converted into lactate and is released into the blood stream where it is eventually converted into glucose. The rest starts to accumulate in the muscles. Too much will eventually cause your muscles to shut down so your body has to get rid of it to continue. To get rid of this additional lactic acid, your body uses oxygen. The amount of oxygen used to remove the lactic acid comes at the expense of the oxygen used to burn fat. From this point, your fat calorie burn rate will decrease until you reach your Anaerobic Threshold (the point where your body can no longer remove the excess lactic acid). At that point pretty much all of your oxygen will go towards lactic acid removal and very little will be used to burn fat.
For me, the maximum fat burning rate was at about 71% of my Max Heart Rate. At that point, I was burning 9.7 calories per minute with 3.6 (38%) being from fat. My Anaerobic Threshold was at about 85% of MHR. At that point I was burning about 14.8 total calories per minute with only 0.2 (1%) coming from fat. At about 80% of MHR, my total calorie burn rate was about 11.7 and my fat calorie burn rate was about 2.5 (21%). This is a typical profile for someone who does a reasonable amount of exercise. An elite athlete(like Lance Armstrong) would have a much different profile. Instead of a peak fat burning rate, he would have a plateau. Due to his superior fitness, his fat burn rate at 70%, 80%, and 85% of MHR would likely be fairly constant. His Anaerobic Threshold would also probably be around 90-95%. This would allow him to save more of his carbs for later in the race.
Finally, it is important to remember that this information is primarily for determining exercise capacity. Even though your % of fat burned may be higher at a
lower intensity, this does not mean that this is the best intensity for a fat loss program. Bodyfat gain or loss is a factor of total calories in versus total
calories consumed.