This question is often discussed in relation to hard drive performance and hard drive wear and tear. A well organized drive is faster because pieces that make up a file are stored in consecutive clusters in fast areas of the drive, and there’s less wear and tear because the drive heads have to do less ‘travelling’ to retrieve a file. There’s however one more consideration:

Under circumstances successful data recovery is only possible with unfragmented files. It’s the type of data recovery often referred to as ‘RAW data recovery’.

Data recovery software like iRescue or iRecover scans a drive for file system structures such as directory structures and file records. As long as it can retrieve administrative information about the location of a file and the clusters making up the file have not yet been overwritten it can recover the file, fragmented or not. Well that is, as long as the file system was NTFS.

A FAT based file system is a different matter. Almost by definition non-fragmented files can be recovered intact. And also by definition, fragmented files can not. First thought to leave this out of the equation, but FAT32 is commonly used on USB keys and memory cards so it is important to mention this.

Also, when NTFS file system structures are largely destroyed the remaining option is RAW data recovery. Using a disk editor or a specialized RAW recovery tool the drive is scanned for ‘file signatures’. For example, a JPG file starts with a specific sequence of bytes ‘FFD8FFE0’ (ÿØÿà). Many if the digital image recovery tools that can be found on the internet work like this. The idea is to scan the drive for this byte sequence, if possible at cluster starts, and as soon as the byte sequence is encountered, to open a file and dump the next few megabytes in that file, close it and assign it a JPG file extension. If lucky you will now have recovered a JPG image file. Now if the original JPG file was fragmented part of the file is not directly following the signature and you will only have recovered part of the file.

So, to maximize your chances of recovery, you do not only have recent backups, but you defrag your drives as well. Unlike with performance considerations it does not matter where your file is, as long as it is not fragmented you’re ok.