Differences in defrag

I am offered a choice to defrag a VM through the Workstation interface. What is the difference between this method of defrag and the traditional defrag process within the guest Windows OS (the guest OS defrags itself)? Come to think of it, what if I defrag the physical drive that contains the VM from the host Windows OS? So what is the difference between the 3 ways to defrag? Assuming that they are different, what are the pros and cons of each method?

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