It's my understanding that Windows defragging utilities don't actually defrag the virtual hard disk at all. They run, but since they're working inside a container file, they don't actually move anything around.
Not entirely the case. Just like the OS on a physical disk takes longer to seek for fragmented files, it still takes longer to seek fragmented files within a virtual disk (which resides on a large portion of a physical disk). However, in many cases there is no truly-noticeable difference. I would expect that to be the case with most Windows VM on Mac users, who tend to use their Windows installations for very specific tasks. However, in general with heavily used VMs, most experts recommend defragging virtual disks for performance optimization (although clearly physical disks benefit much greater). The benefits in a server environment, for example, can be measurable. Anyhow, I'd agree that most Parallels users prob needn't bother.
