I heve recently gained a lot of weight, I am now about 70 kg. I want to lose at least 10 kg. I am on a diet and I have started to exercise. A friend of mine told me that toning exercises (like bicycle, gym instruments, even swimming) will make my muscles bigger, and even though I will burn some fat, my body will not get slim, but my current volume will just look more toned muscle-wise. (I will still be big but with muscles, like a body builder, instead of the floppy fat body I have now). She said I should do this sort of exercise after I lose weight and I become slim but not so fit, so that I can get lean muscles. Is that true? Should I only do aerobic exercise? Do you have any personal experience on the matter, if you've lost weight recently?

You want to do both. Muscle burns fat even when you aren't working out, so you definately want to do some strenght training but you also need to do a lot of cardio.
I do cardio 5 days a week for about an hour each day and strength training 3 days a week for about a half hour and it has really helped me out.

Your #1 focus should be cardio. Either running, an elliptical machine, or a treadmill. You can also do some weight bearing exercises (like curls with dumbbells) if you want to be toned as well. Both are important, but to lose the weight you should do at least 4 days a week of cardio for at least 45 minute intervals. And reduce your caloric intake. Weight loss stems from more caloric output than calories consumed. Weight gain is the opposite - you are taking in more calories than you are burning.

Ever watch the Tour de France? Do any of those guys look bulky?
Ever watch Olympic swimming? Do you think Amanda Beard looks bulky and unattractive?
Ever watch a marathon? See any bulk there among the elites?
Your friend has no clue. Those athletes look like that because of their workouts. They are not athletes because they were born looking that way!!!!

I have lost some pounds in the last 2-3 years (was 240 ~250 pounds - 240 = 108kg). Now I am 208 = 94.4kg)
I disagree with everyone - and I am right since I am Greek. :)
You should consider changing your habits - I lost a lot of weight when I stopped eating before bedtime.
Also, I used to eat everything on the plate, now I always leave a little.
Fasting the Greek-Orthodox diet helped me.
Exercise will increase your metabolism and will over long term also help with your weight loss...
The biggest problem in my opinion is that one does not see results right away.
But if you eat more than you burn then you will gain, while losing weight if you burn more than you eat.
So, it should be changing your habits on both ends, and pretty soon you will look like you did many years ago.
I.e. eat less, and exercise a bit.
Try to exercise something that you enjoy, as you should be doing it consistently.
The best result of weightloss is having to get your suit retailored...
Have to pick mine up tomorrow, had to be trimmed a bit ).
You can do it - a little bit at a time
mind over matter.

Definatly keep up the exercise, especially the cardio. And, don't worry about your muscles and what you'll look like. The most important thing "right now" is to get healthy. Getting fit comes along with more exercise. Good luck.