It won't defrag with such little free space.
Uninstall programs you have installed but don't use.
If you have another drive (D?) with plenty of space, move your documents, music, photo and video to that drive.
If you don't have such a drive, consider buying an external hard drive - they are reasonably cheap now and simple to use.
Assuming you have XP:
Start - control panel - performance and maintenance - free up space on hard disk. Choose 'C' , tick all the boxes, click 'more options' and clean up system restore. Click ok.
Now you should be able to defrag.