67kg, can someone explain how that is 'obese'?

My diagnosis: your scale is wacko! To be honest, I think BMI calculators typically calculate you being fatter than you are, so something that is so dramatically over that... My guess would be it's food for your trash can.

BMI calculators are not accurate at all. When I first had my body fat checked, I was 36% and yes, it is considered obese. I'm now down to the overweight category with body fat.

According to the BMI, Arnold Schwarzenegger at his prime was obese. The system is flawed.

I would use body fat calculator something like this. http://www.healthstatus.com/calculate/body-fat-percentage-calculator
I think Marine or YMCA formula are the best. Scale could be off my 10%. I would average what scale tells you + website. Also make sure you are naked or not dressed too much too. Do it the morning after restroom trip:) Does your scale also shows water %?

you are two inches shorter than me and weigh 3lbs less than my ideal weight. hmmmmm FLAWED! the only way to actually check your BMI accurately is to dunk yourself in a tank of water and measure the water displacement. The computer tells me my ideal weight is somewhere around 140 but my dr tells me NEVER to drop under 145. I have extremely heavy bones and have a lot of muscle on my body. I look fantastic in the mirror right now and I weigh 173. I still need to loose weight right now, but i'm not OBESE!

I do not think your scale is bases its judgement on BMI . Check out any BMI calculator on the net 163cm and 67 kg has a BMI of 25.2. The normal range is 20-25, so you are just right on the fence of normal weight .

If your scale says that you have a 40% of body fat, that is a different story. Your probably dehydrated and that is why your scale off measuring body fat. You should go to a doctor or a fitness club equipped to measure body fat.

However there are the skinny fat people out there, who are normal size, but all that size is fat not muscle. I am not saying you are in that category, but 40% is a very high body fat for that size. Even if the scale off as much as 10% , that is still very high given your size.

what I was just about to write

no you don't need to become skinnier its not about losing weight, it's about toning up. We're also not saying the scale is exactly right either. You asked the question we're all just giving you options to why the scale gave you that percentage it's then up to you decide what information you want to take from all the posts.

BMI stands for two different things in the weight-loss world.
#1 (common) Body Mass Index. This is the one that compares height to weight and give you a number, and this is the one that generally is used in calculated "healthy" "overweight" and "obese" (but with all the flaws pointed out earlier, esp that it would put most body builders in the overweight to obese categories, ignoring that it's muscle).
#2 (what you generally see on scales) Bio-Metric Impedance. This is how scales (and the little hand-held devices) measure your body fat %. It sends a pulse through your body tissue and measures how easily it comes back. Muscle, fat, and water all have a different level of impeding the pulse, so it uses some sort of calculation to give you your body fat % (and some give hydration).

Healthy body fat for a woman is generally under 30% (I don't remember the exact, but I know that I want to aim for 20-25% for myself). So 40% would be considered problematic.
However, the biometric impedance measurements, especially those on a household bathroom scale, are quite inaccurate. If you can, you might want to get a skin-fold caliper measure by someone who is trained in measuring and interpreting. When I was with a trainer, we did this weekly. She measured my arm (tricep area), mid-back, side abs (love handle area), and thigh and used these along with my age to calculate body fat %.
I have a scale that measures fat, and it seems to jump around a lot. I'm not sure it would even give me a good idea if my fat is going up or down!

Visceral fat actually wraps around your organs. You can't see it. Also, body fat % on scales depends heavily on hydration, if you aren't properly hydrated, the number on the scale could be off by 10-20%. I bought a scale that shows body fat and hydration because it was on sale, but I manually check my body fat % myself. The scales says 36%, and my own measurements say 25%, so I figure I'm probably somewhere in between. But, yeah, not all fat is visible, that's why plenty of people can look perfectly normal, but have high body fat.