Consider the fact that people with congenital generalized lipodystrophy, in whom fat cells are lacking from birth, typically develop components of the metabolic syndrome such as insulin resistance, non-alcoholic fatty liver disease (NAFLD) and type 2 diabetes at a much earlier age and in more severe forms than do obese humans. This is believed to happen because a dearth of fat cells causes the body to have no "safe" place for excess fatty acids to be stored, and people with lipodystrophy tend to generate excess fatty acids because they cannot make much leptin, a major adipose-derived satiety hormone, and hence have a strong drive to eat. Some of the excess fatty acids will end up being stored in the liver and muscles as well as in other non-adipose tissues (aka lipotoxicity) resulting in decreased insulin sensitivity in these organs and the metabolic syndrome.
Obese humans, on the other hand, are not lacking fat cells so they can, and do, store a lot of excess fatty acids in their fat cells. I'm sure we've all known overweight or obese individuals who possess good health with no obvious signs of the metabolic syndrome - normal blood pressure, normal blood sugar, normal lipid profile, etc. These individuals will often bring these things up when a friend or family member urges them to lose weight - "All my blood tests are good and I'm not on any medication; my doctor says I'm healthy so I feel no urgent need to lose weight." And they may be able to go their entire lives without a hint of the metabolic syndrome if their fat cells maintain their insulin sensitivity. If they don't, these corpulent individuals will become, in essence, like a person with congenital generalized lipodystrophy: unable to store excess fatty acids in adipose tissue which will lead to lipotoxicity and metabolic syndrome. Unfortunately, the majority of obese individuals will develop metabolic problems related to their weight at some point in their lives.
It has been shown that many people's free fatty acid blood levels are elevated years before a diagnosis of type 2 diabetes (which is based solely on some measure of high blood sugar). In other words, blood sugar can remain within normal limits while fatty acid levels are soaring. Knowing that the inhibitory effects of insulin are the more physiologically important, this indicates that adipose tissue becomes resistant to insulin (resulting in increased free fatty acids via unrestrained fat cell lipolysis) before the liver does (resulting in increased blood sugar via unrestrained hepatic glucose production).
It's also important to note that a class of diabetes drugs called thiazolidinediones (TZDs) lowers blood sugar primarily by increasing fatty acid uptake and storage in fat cells. By taking excess fatty acids out of the circulation, the liver becomes less affected by lipotoxicity and regains its sensitivity to insulin. Hepatic glucose production is restrained by insulin in a more normal fashion and blood glucose concentrations fall.
Further, it has been demonstrated that serum free fatty acids are the main source of liver triglycerides in people with NAFLD; therefore, fat cell insulin resistance to lipolysis is likely a major contributor to fat accumulation in the liver.
Using the above information, the following scenario makes sense to me:
Chronic caloric surplus (possibly caused by a diet high in sugar and fat along with a sedentary lifestyle) causes fat tissue to expand to sequester toxic fatty acids that would otherwise damage organs. When fat tissue can no longer expand, it becomes resistant to insulin. This leads to increased fat cell lipolysis and elevated free fatty acids which leads to "ectopic" fat deposits in the liver and muscles. The liver and muscles then become resistant to insulin. This leads to increased hepatic glucose production with substrate partially supplied by amino acids coming from skeletal muscle because of increased proteolysis. The increase in blood sugar results in stimulation of insulin secretion from the pancreas. We now have chronic hyperinsulinemia and hyperglycemia - these conditions are associated with and possibly cause many of the problems linked with the metabolic syndrome like hypertension, coronary artery disease, kidney disease etc.
To be continued...