When an application needs to create a file or extend an existing file, the file system must find space for it. The file system views a disk as a string of Logical Cluster Numbers from 0 to NNN, depending on the size of the disk. These free clusters are rarely contiguous to the existing file, so over time, a frequently used file can accumulate a hundred fragments or more. This means an application request to read the file must locate all the pieces.
File deletions can add to the problem.
As more and more of these small holes appear, it gets increasingly difficult for the file system to allocate any contiguous space for new file creation or extension. So the file system uses these holes, making files even more fragmented. A good test is to see how long it takes to back up a partition with fragmented files vs. one with contiguous files. After defragmenting the files, the backup took 10.2 minutes. That's a 63 percent improvement.