What Happens
Sugar is a carbohydrate, so when you remove the water from the molecule, you"re basically left with elemental carbon. The dehydration reaction is a type of elimination reaction.

C₁₂H₂₂O₁₁ (sugar) + H₂SO₄ (sulfuric acid) ? 12 C (carbon) + 11 H₂O (water) + mixture water and acid

Although the sugar is dehydrated, the water isn"t "lost" in the reaction. Some of it remains as a liquid in the acid. Since the reaction is exothermic, much of the water is boiled off as steam.

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