This can have two different contexts.
For message packets: When the contents of a message are too long for a packetA group of bits being sent from one place to another. How big the group is may vary depending on what kind of packet it is. Long messages -- like an email -- will typically be broken up into many packets, each of which travels independently until it gets to the destination, where they're reassembled into the email., then the message is fragmented into multiple packets for sending, and those fragments are reassembled on the receiving end of the message.
For memory: A situation where free memory is broken up into small pieces throughout the memory rather than accumulated at one spot. This makes it harder to allocate the free memory, since the small pieces may be too small for a new allocation request.