"What defragmentation does is in essence to rebuild each chain of clusters into one continuous chain for each file. When each file is located all together this reduces significantly the amount of seeking the Hard Disk Drive must do in order to locate and access the entire file, thus it significantly improves disk access time."
FULL STORY @ TWEAKMAX (http://www.tweakmax.com/html/hddoper/hddoper-1.cfm)