When your disk get fragmented your over all system performance will suffer and applications that use large blocks of data will suffer performance hits especially badly.
The article linked bellow provides a great basic lesson on OS X disk fragmentation and uses the example of installing a boot camp partition for running your Mac in dual boot (Mac and Windows) mode as a reason someone might want to use a defrag application to “fix” your disk.
Many people reading this will be doing some digital audio recording with their computers and along with video editing these type of applications use very large files and can suffer significant performance issues when your disk drive(s) become too fragmented. If fragmentation is bad enough it can easily be the cause of drop-outs or lost frames in AV recording / editing applications (which is why this subject is so important to the pro media creation community).
Apple official word on disk fragmentation is that OS X takes care of this for you, and under most instances it is true. But over time there are a number of circumstances that can cause excessive fragmentation. The biggest is the lack of free space. I have found (empirically from years of use) it is a good practice to keep a MINIMUM of 10% of your disk free at ALL times.
The 10% is also dependent on the size of your disk and the size of files your work with (when considering the size of files remember the hidden files like cases you programs use but you never directly see – if you are working in photo shop on a 100 mb file you may have 5x or more the file size taken up in cases for undo’s and general workspace). The overall free space needs to be considerably larger (10x is a good minimum so if you are doing music or video and yoru files sizes are 500 mb you ned 5 gb).
This is fine if you have a 500 gb disk and you can keep at least 50 gb free, how ever it can become difficult when your disk is smaller and the files you work on are big i.e. you have a 80 gb drive and you need to keep 8 gb free (as with a 1st gen Macbook air). Using your computer for Audio Video hub applications like movies on iTunes can be very problematic on laptops that typically have small (and slower) hard drives.
In the Disk Fragmentation & OS X: When Does it Become a Problem? blog post on theAppleBlog.com Andrew Bednarz does the best job of telling you what to do to reduce excessive fragmentation inlcuding links to tools you can buy to help.