When you lose weight, does your stomach actually shrink?

I'm in the 8 month long term process of losing weight. I need to lose 25kilo's (55pounds) and am over halfway there already. I was always told that when you lose weight your stomach will shrink making you feel full with less food. Is this an old wives tale? Does this also mean that over time, the 'hunger pangs' I experience will dissipate or is it that I am just getting used to them?