Disk defragmenters can detect computer files whose contents are broken across several locations on the hard disk, and move the fragments to one location to increase efficiency. When files are created, deleted, or modified it's almost a certainty they will become fragmented. Fragmented simply means the file is not stored in a contiguous location. The more fragmented files there are on a drive, the more performance and reliability suffer as the drive heads have to search for all the pieces in different locations.
The main use of the disk defragmenter is to move all the files around so that every file is stored in chronological order on sequential rings of the disk. A good defragmenter may also try to place all applications close to the operating system on the disk to minimize movement when an application loads. A hard disk is a collection of information buckets called "clusters". Each cluster is a fixed size. When you create a file on disk, Windows assigns enough clusters to the file to hold it.
Clusters aren't required to be next to each other on the disk. In fact, that's part of what the "Random" in "Random Access Storage" means; data can be accessed and stored on the disk in random places. So when Windows creates a file, it keeps track of which clusters make up the file and in which order they should go.
The Disk Defragmenter Utility is designed to reorganize non-contiguous files into contiguous files and optimize their placement on the hard drive for increased reliability and performance. When Disk Defragmenter first opens you'll see a list of the hard drives displayed at the top of the screen. The Estimated Disk Usage before Defragmentation and Estimated Disk Usage after Defragmentation will be blank until a drive is selected and the Analyze button is clicked.