What does defragmentation do to computer system?

I learn from some tips on how to make your computer work faster. Defragment of the drive is one way to keep my computer work faster but I'm afraid to defragment my computer because I don’t have any idea of what defragment all about. I have some question regarding this matter.
Your answer would be a great help for me or any other reader who will read this post. Please provide me more information regarding this matter. Here are the following question I have in mind. How often should I defragment my hard drive? What are the indication that I need to perform drive Defragment?
If I have 2 partition of hard drive do I need to defragment both of them or just the drive where I installed my Operating System? What does defragment really do to my system? Is there any software for this if any which is better the built in defragment feature of a windows or the software?
