Fragmentation is an unwanted problem in the operating system in which the processes are loaded and unloaded from memory, and free memory space is fragmented. Processes can't be assigned to memory blocks due to their small size, and the memory blocks stay unused.

Fragmentation is indeed a significant issue in operating systems. It occurs when memory is allocated and deallocated in such a way that free memory is broken up into separate blocks. This fragmentation can be of two types: internal and external.

1. Internal Fragmentation: This happens when memory is allocated to a process more than it requires. The extra space which is not used leads to wastage of memory resources.

2. External Fragmentation: This occurs when free memory blocks are scattered and not contiguous. Even if the combined space of these blocks is enough to satisfy a request, it can't be used because the blocks are not contiguous.

The problem of fragmentation leads to inefficient utilization of memory. It can be reduced by various techniques like compaction, paging, segmentation etc.

Compaction: It is a technique in which the entire contents of memory are rearranged to place all free memory together in one large block.

Paging: It is a memory management scheme that eliminates the problem of fitting memory chunks of varying sizes into the backing store. Memory is divided into fixed-sized blocks called pages.

Segmentation: It is a memory management technique in which each job is divided into several segments of different sizes, one for each module that contains pieces that perform related functions. Each segment is actually a different logical address space of the program.

When a process is to be executed, its corresponding pages are loaded into any available memory frames. This technique reduces external fragmentation.