Although it might be a little too technical for you as a 13 year old, a really comrehensive explanation of (de)fragmentation can be found
here.
This Wikipedia article might be a little more 'understandable'.
Basically defragging is rearranging all the files on your harddisk so that there is no space in between and the free space on your HDD is one big chunk. When you install and uninstall software or save and delete files your HDD becomes fragmented; blocks of data become cluttered all over your hard disk. The space that deleted files leave are not necessarily filled with new ones. That is fragmentation. Defragmentation is repairing the above

Windows has a decent defrag tool on board and the post above aleady told you how to do it.
But there are better tools. I use O&O Defrag Professional 8.5 and I get very good results with it. I believe you already read the Windows Tips & Tricks by Nick Needham so you should already have heard about O&O. But be carefull with O&O ... if you have a disk that is larger than 137 GB and don't have Windows XP SP2 you could get in to some serious trouble! Trust me, I know ... I've been there :-/
Ordinary Windows users will hardly notice any difference when they don't defrag regularly but we Flight Simmers will notice the difference as our beloved sim is soo demanding of our systems. As i said before, the smoother your system the smoother your sim.
Again ... if you need anything just call 8-)