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Pretty sure it was really just smarter filesystems that avoid and/or reduce fragmentation automatically: just be a bit more clever about where you place things, and reorganise/optimise things automatically and silently in the background.

Such things did exist back in the day, but they were relatively expensive to run since they had to run all the time. There was one that I used to run back in the 90s when windows was a thing. I think maybe it was diskeeper but I'm not sure.

I think NTFS and SSD disks.

Fragmentation is an issue with any file system. SSDs dramatically reduce the cost of fragmentation but do not eliminate it, as non-sequential access is still slower than sequential access.

FAT32 allocates the first free block. IIRC, file order must match disk order because reasons. Ext2 prioritized allocating the middle of free space to allow fragment-free growth on both sides and it became a standard filesystem feature after that.

And, disk capacities got a lot larger. When most of the space on a disk is free, it's easier to allocate without fragmenting.