I am running Windows XP, and have dirms version 126.96.36.199 command-line utility from 2010 installed.
From my understanding of this program's documentation, NTFS leaves a gap between files, such that a disk has fragmented free space. Second, if a smaller file is deleted from the drive, that opens up its space for reuse. If a larger file is added, even if there is a large enough segment of free space to hold this new file in one segment, the first, smaller space is used, and the file is fragmented as its remaining fragment fills the next available space.
Dirms packs files together, defragmenting free space and thus making larger segments of space available. This is done with the command line entry "dirms c compact" where the first "c" is the drive letter to be compacted. If defragmentation and moving files closer together via compacting are done, this reduces the tendency to fragment files.
Dirms cannot solve the NTFS issue with deleting a smaller file and then adding a larger file, for the new file will still fill the first available space vacated by the smaller, deleted file and then become fragmented. That is a file system fault. (Of course, a run of Dirms after deleting a file will avoid the fragmentation of the new file!)
I also understand from the documentation that dirms will reduce the number of fragments when there is not enough free space available to fully defragment a file. The built-in defrag tool will not even attempt to defragment a file if there is not enough free space in one segment to hold the entire file. Dirms contends that a partial defragmentation is still better than none, for it requires less drive head movement to read the file.
I have Auslogic's DiskDefrag 188.8.131.52 installed, and it has the ability to position system files first on the drive for rapid system responsiveness. I notice that it leaves a free space segment near the beginning whereas dirms will not. It could be the thinking here is to provide free space near the front of the drive for rapid read-write response on a freshly defragmented drive.
I get the idea that Auslogics also compacts files together, but their documentation is a bit skimpy on that point, versus the fairly in-depth discussion offered by dirms.
I did notice some performance boost after Auslogics' first run, reordering system files first.
Perhaps the best of both worlds is to periodically run Auslogics to place system files first and then compact with dirms. I don't know if removing Auslogics' up-front free space with dirms would materially take away from the system speed boost, but that would consolidate your free space to the extent permitted by the presence of immovable files.
The friend who put me onto Auslogics indicated a wish that the Auslogics would have allowed him to place the swap file up front, to possibly further increase performance.