When the first file is recorded on the drive, it is laid down as a continuous chain of clusters.  With time, some files are erased and others are written in their place... New files don't always fit in the same space as some portions of them are stored elsewhere on the disk. This is how the files become divided - or fragmented.
When the head is reading a fragmented file, it has to move a lot from one track to another and often wait for a needed cluster of data... Thus, data fragmentation slows down the hard drive.
Defragmentation software first moves some files into free areas of the disk and lay them down continuously.  Then, when enough room is freed closer to the outer diameter of the disk (where the speed is higher!), the software writes file back in a continuous way thus making data reading faster.  When the drive is defragmented, its performance improves. 

Restart Defragmentor

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