Back in the DOS days (and early versions of Windows), the system would read one file at a time, end to end. Combined with slow seek rates, this made defragging a big win.

However, XP/Vista will read segments of multiple files at the same time. Since it has to seek between files anyway, fragmentation is less of an issue.

XP/Vista also uses caching and prefetching to minimize disk access times. The Windows\Prefetch directory contains maps of frequently accessed disk blocks for different programs. When they start it loads those blocks right away rather than waiting for them to be demanded.