Defragments your disk, to state the obvious!
Sorry, couldn't resist......anyway, as you use files (which are made up of clusters of a specific size, stored on your computer), your filesystem places them into memory, and when finished, places them back on your hard-drive (but not necessarily in the same order it got them). This mis-ordering as files are used more is called fragmentation.
Defragmentation fixes this, and ensures that files are stored in clusters one after the other, which makes accessing the files quicker.