Well It makes your hard drive run faster, intern making the computer run faster. It arranges your files in an orderly fashion rather them being spread out among you hard drive.
Also to make your computer run faster you might want to install and run SpyBot and Ad-Aware too.
The Disk Degragmenter won't erase your files...it won't even really make your computer like new...basically all it does will reorganize the files on your harddisk to make it easier for the computer to find it. You need to format your hdd if you want your computer to run like new.