The physiology behind exercise's role in controlling diabetes: burns fat, increases insulin-independent glucose uptake and increases capillary proliferation.
Type II diabetes occurs when the body fails to regulate its body's glucose levels. The failure can occur at many points in the body. The pancreas may fail to produce sufficient insulin, the liver may fail to release glucose into the blood, endothelial tissue lining the capillaries may fail to take glucose out of the blood or the cells themselves may fail to take up glucose. It is important to get glucose to the skeletal muscle because the body stores nearly 80% of its glucose as muscle glycogen. Insulin and its antagonist glucagon control blood glucose levels by stimulating the liver to take-up or release glucose or by triggering peripheral cells to take glucose out of the blood. If insulin fails to do its job, either because it is not produced or because peripheral cells lose their insulin sensitivity, the body's cells will not take up glucose even with high blood sugar levels. This is why diabetes is described as "starvation in the midst of plenty." The cells are starving for energy even as blood glucose levels rise. When glucose is too high in the plasma the kidneys filter it out with the urine because the kidneys cannot maintain such a high glucose osmolarity gradient. Exercise controls type II diabetes through several mechanisms: it decreases fat stores, increases insulin-independent glucose uptake in the muscle and increases the amount of capillary surface area for glucose uptake in skeletal muscle.
Excess fat tissue has long been known to decrease insulin sensitivity. This is why obesity increases the risk of diabetes. Exercise obviously burns off fat and thus can reduce diabetes risk this way.
In the 1980's it was reported that exercise increased muscle glucose uptake independent of insulin (Increased Muscle Glucose Uptake After Exercise: No Need for Insulin During Exercise, 1985. Richter EA, et al.) Researchers discovered that the exercise-induced increased insulin-independent glucose uptake remained after the exercise bout was complete. The figure below demonstrates how muscle glucose uptake increases with increasing exercise intensity and duration.
The mechanism by which exercise increases glucose uptake independent of insulin has been worked out in the last decade (Skeletal Muscle Glucose Uptake During Exercise: How is it Regulated? 2005. Rose AJ and Richter EA). It is now known that the primary glucose transporter responsible for the increased glucose uptake in skeletal muscle fibers is GLUT4. Researchers believe the mechanism may be that the calcium influxes in the muscle that primarily stimulate muscle contraction also trigger GLUT4 to the cellular membrane to increase uptake of glucose. The figure below shows the pathway glucose takes from the blood stream to muscle fiber. Glucose diffuses out of the capillary and into the interstitial fluid. The rate limiting step is glucose uptake via GLUT4. Once inside the cell, glucose is phosphorylated for glycogenesis (synthesis of glycogen, the myocyte's primary means of storing glucose) or glycolysis (catabolic process that generates ATP to be used immediately for energy).
A study that was released late last year found that exercise increases insulin sensitivity through capillary proliferation in the muscle (Muscle-Specific VEGF Deletion Induces Muscle Capillary Rarefaction Creating Muscle Insulin Resistance, 2012. Bonner JS, et al.). In this study the scientists used mice with VEGF expression knocked out in cardiac and skeletal muscle at day sixteen of development. VEGF, or Vascular Endothelial Growth Factor, produces angiogenesis (capillary proliferation) in the skeletal muscle and is released in response to aerobic exercise. The researchers found that when insulin levels were controlled in these knockout mice they had a harder time regulating their blood plasma glucose levels. The researchers concluded that VEGF increases insulin sensitivity and glucose uptake in skeletal muscle. The authors suggest that increased muscle blood volume and capillary surface area for the delivery of insulin and glucose to skeletal muscle fibers may help regulate hyperinsulinemia.
While it is obvious that exercise controls diabetes, it is interesting to know how exercise accomplishes this. It is likely that there are many other mechanisms not mentioned here because the medical community or this author is not aware of them yet. If you have more ideas, share a comment!