Note: You can't technically turn muscle into fat becuase there is no pathway that the body can us to make muscle tissue out of fat tissue. The phrase 'turning muscle into fat' actually describes two different steps: losing weight/burning fat AND building muscle.
1. Calorie Deficit. To burn fat you need to eat less calories than you burn. Only through this calorie deficit will your body begin to use its stored fat reserves as energy and you will see your body fat percentage start to decrease. You can use the Calorie Calculator to estimate how many calories you burn per day.
2. Cardiovascular Exercise. To burn even more calories, you should be engaging in some sort of cardiovascular exercise 3-5 times per week for 30-60 minutes per day. Cardio will burn a lot of calories which will force your body to use fat stores for energy. Anything that you do continuously and at a high intensity can be good cardio: tennis, running, basketball, bike riding or even house work such as mowing your lawn.
3. Weight Training. Building muscle is only possible by pushing them further than what they are used to. Only by overloading them will they respond and eventually get bigger and stronger. You can use free weights, machines or even body weight for push ups, pull ups and sit ups.
4. Eat Protein. Building muscle requires that your diet is high in good quality protein. Protein from vegetable sources do not contain all the essential amino acids. To build muscle you need all of the essential amino acids. Foods containing good protein come from animal products such as meat, dairy, fish and eggs. If you are a vegetarian you can get good quality protein from eating a wide variety of foods.
5. Eat Complex Carbs. Replace the sugar you eat with complex carbohydrates. Sugar is digested very quickly and gives your body a large amount of calories right away. If these calories are not burned up quickly, your body will store them as fat. Complex carbs are not digested as quickly and will give you a slower energy release. This will allow you to use the energy over a longer period of time without it being stored as fat.