What it's saying is that your drive is a mess!
It basically means that bits and pieces of data are scattered all over the drive, which need to be pieced together each time an action is performed, or a file is accessed on the drive. This is caused by adding and removing data over a period of time, which everybody does. The act of 'defragmenting' or 'defragging', is supposed to tidy up the drive, so that data is more easily accessible, and therefore the drive runs more efficiently, theoretically improving the performance of your system.
Personally, I have mixed feelings about Diskeeper. I ran it for a while, admittedly the 2006 version, but found that it was constantly defragging, and this itself was impacting on performance. I wasn't convinced that it was having much of a positive effect, so I uninstalled it. People have different opinions, so do wait for some more responses. Some people think that Windows XP is efficient enough that defragging isn't essential, and some think that constant defragging can actually shorten the life span of the drive. Some people swear by Diskeeper and wouldn't be without it, so I guess it's each to their own.