Unlike the files located on your hard disk, your SQL data files cannot be defragmented in a similar fashion. Disk defragmentation will ensure that the physical data file is stored in a single contiguous block on the disk, but cannot defragment the indexes and data pages located within the data file.
The Database Defragmentation Wizard can analyze and defragment the indexes and data pages internally in the same fashion as the built-in disk defragmentation utility that ships with Microsoft Windows 2000.
Both processes can be run while the database is on-line.