You have a HDD. On it exist files, some of which can't be moved because they're in active use by the system. The files aren't in a linear position; as you delete and add files, they become fragmented, so that parts of the files exist in entirely different locations.
Windows is complaining because parts of the unmoveable files exist all over your HDD. In order for you to make partitions, you have to defragment it first so the unmoveable files can possibly be put back together (in a way of speaking) and moved to an earlier chunk of your HDD.