Hi,
Open Windows Task Manager, go to View -> Select Columns and check the CPU Usage, CPU Time columns, I/O Reads, I/O Writes and I/O Other. These should tell you what each process is doing.
In your particular case, for the defrag, the I/O columns should be of interest. For example, I have installed DiskKeeper 2008 Pro which rarely uses any CPU but it does a lot of defragmentation when I'm not paying attention to my computer. HDD LED blinks while CPU is as 1% ? I take a look at the I/O columns to see who's busy. Also, note that the process that uses the most CPU is not always the one to slow your system because there may be another process that works a lot with your hard drives. Your system could sometimes be slow because there's a process that does a lot of reading/writing while Windows is trying to access the paging file.
For who doesn't know:
CPU Usage - how much % of the CPU is in use at that moment by the process
CPU Time - actual total foreground time which was used by that process since it was launched (this may be 1 second for applications that just stay in the background and don't do very much or it may be hours for applications that use the CPU intensively). if this value increases, the process is using CPU.
I/O Reads, I/O Writes, I/O Other - these will tell you how many times the process has accessed input/output devices. if one of these values increases, the process is working.
Hope this helps,
Tom
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