As you use a computer, over time your files will tend to get scattered around the disk. This scattering is called fragmentation, and can slow down performance as the disk head has to seek back and forth between fragments (Note: doesn’t apply to solid state media, which doesn’t involve disk heads). Defragmentation (or defragging) is the act of reversing the process, putting order back into your system. With virtual machines, proper defragmentation is a little more complex than it is on a physical machine because of the layers involved.
Before we begin, it’s important to note that defragmentation isn’t a necessary task – your virtual machine will still work just fine even if you never defrag, and the effects of fragmentation are usually not noticeable. Personally, I’ve never feel the need to defrag. However, if for some reason you do feel the need to defrag, here’s how to do it. Note that snapshots get in the way of proper defragmenting.
Check out the full link http://blogs.vmware.com/teamfusion/2008/10/tip-defragmenta.html
I thought this was interesting, and is a reversal of what IT does with a Physical Computer.