I never do it and my computer isn't any worse for it...furthermore defragging does not significantly improve performance, according to some studies that I've read - probably due to the significantly decreased seek times in modern hard drives.
Windows, for various reasons, will slow down in its performance with continued use (new processes, programs and other junk that gets installed with or without user intervention). The only effective method of speeding up your computer is to back up all your files and reformat. In a lot of cases, this is often faster than trying to diagnose the cause of the problem (there are heaps).
I recommend it be done every 6 months - 1 year. Besides, it'll get you into the habit of keeping backups