Fatty liver disease is  a condition caused by the presence of excessive fat in the liver. Patients with fatty liver disease can run the risk of developing inflammatory damage which can sometimes cause scarring of the liver.
The condition is associated with obesity and other diseases such as diabetes, insulin resistance, high cholesterol, high blood pressure and if you smoke.
Fatty liver disease in the setting of diabetes especially carries a greater risk of liver injury. If you have diabetes you should talk to your doctor about evaluating for fat in your liver.
The good news is that as little as 5% decrease in body weight can significantly ameliorate fatty liver disease.