A dictionary definition says
>in close proximity without actually touching; near.
Your hard disk is divided up into lots of little "sections" (a bit like graph paper which is divided up into little squares).
Windows puts all your files in these little squares and manages them for you.
Some large files take up more than one "square" so have to be placed in lots of squares (Windows sorts all this out for you).
Over time these "parts" of files (in their little squares) get placed all over the hard disk (we see it as one "file", Windows sees it as lots of little sections, each in their own square, to join up for us).
When you defrag you move all the little sections (squares) next to each other, so Windows can find the file and work with it quickly.
Hence "contiguous"