Defrag is a process you can optionally do on Microsoft's file allocation tables ONLY, (FAT16, FAT32, NTFS) and what it does:
link to wiki
The purpose of Disk optimization is to optimize the time it takes to read and write files to/from the disk by minimizing head travel time and maximizing the transfer rate. The used techniques include:
1. Move all the index or directory information to one spot. Move this spot into the center of the data, e.g. one third of the way in, so that head travel to data is halved compared to having directory information at the front.
2. Cluster files around the directory area.
3. Move infrequently used files further from the directory area.
4. Obey a user provided table of file descriptions to emphasize or ignore.
5. Make files contigious so that they can be read without unnecessary seeking (defragmentation).
Bootcamp splits your hard drive into multiple allocation tables (partitions) that basically assign different formats of space on a single hard drive. So your hard drive, when you install boot camp, is split so that some of the space is available and readable by Windows XP's install program and then formatted to the allocation table you choose within it.
The connections between Windows XP and OS X when you use boot camp is only that they are on the same hard drive, really, so you could get some nasty virus on the WinXP partition and it wouldn't affect your OS X data. (In fact, Windows doesn't even know the hard drive is being shared with OS X.)
In theory it's possible for you to get a virus on OS X however, and if it was masterfully written, it could infect your windows partition too (If you're using the FAT32 system) and do damage to both data tables. (The chances of this are so slim however I wouldn't even consider it a plausable theory. Maybe in the future.).
