Fragmentation happens when you delete files often.
Example :
You copy 100 small pictures on your computer. They are stored in order on the hard drive. ( Think of it as a table with rows and columns ). Now the top rows are filled, the rest is empty.
You delete 10 of the small pictures. The top rows now have "holes" in them, where the pictures used to be. These holes are free.
Now you install a huge video game. This takes a lot of space, and the operating system places the game's files in the holes ( where the pictures were ) as well as the free rows below where the pictures were.
Imagine this happening hundreds of times over. Now your hard drive looks like a checkerboard, with different files spread all over the hard drive.
When a program wants to read its data, the data will not be in one place, but scattered around. The system needs to find the data first. The hard drive moans because of the effort to read data from many different places.
This is called "fragmentation" because programs have their data "fragmented" across the hard drive.
Defragmentation is simple. We take the data and try ( like a puzzle ) to put it all in one place. Each program with his own tidy uninterrupted place on the hard drive.
Fragmentation slows down all programs.
Defragmentation speeds them back up.
You can think of reasons on why defragmentation is needed, now, can't you?
Best of luck!