What is a "fragmented" file?

Hello Again...
It's your computer-impaired friend.
What is a fragmented file?
Are they completely ruined, or do they just need to be put back in order - like the clothing in my closet?

The reason I'm asking this is that I defrag my computer every Saturday and a few days on "Defrag Saturday" I was STUNNED to find out that my disk memory available had dropped in 7 days frm 42% to 4%...  My HP Pavilion dv8000 said that it needed at least 15% to do a degfrag.

Well, I got rid of some programs, old files, goofy photos, etc. and gained a whole percentage point.
Then I went to the online HP chat line.  Now, remember, I'm a bit slow with stuff like this (I'm an artist - does that explain things - I mean, I could put a 3-d collage on your desktop that would win awards, but I'm just lucky each day to see that my desktop hasn't "crashed" or whatever...),  Well, the gal was right on top of things.  The very first thing she asked was whether I'd added a restore point during the week - YES, I had.  I was forced to do this when the man from the cable company came to set me up with wireless and mid-session he became violently ill.  I immediately called 9-1-1 and told them that he'd suffered a brain aneurysm in my office.  The operator was INCREDIBLY hesistant to take me seriously but I told her that I was a medical intuitive (medically psychic) and was called upon by the Cleveland Clinic and other hospitals to help with difficult Dxs.   Well, she dispatched an EMS team and, sure enough he had emergency brain surgery within one hour and I'm happy to say that he will fully recover.

The reason I added that was to explain that I thought I should add a restore point since my PC hadn't been operating quite normally for about 10 days.  So I set this point.  And the HP chat professional said that doing that really took my memory away...  She gave me the MOST COMPLICATED instructions I can imagine and I was unable to follow them.

So I need to know (for curiousity) the meaning of a "fragmented filed," a "defragmented file" and how to restore my memory.  I'm almost to the point of just buying some more, but I know the problem can be solved by smart people like you.  So, I thought I'd be "cheap" and go with your ideas - NOW REMEMBER - don't make them too complicated!!

Thank you all, so much!