The "Reorganize Pages" option does something else. It logically reorganizes the pages within the file, but it does not adjust the size, type or fragmentation of disk extents as allocated by the drive subsystem.
For example, say I have a file that has 10,000 separate allocations/"chunks" of 2MB each (total file size of 20GB) on a drive. Say also that the data is out of logical order, such that key 1000 is in the allocation 1, key 400 is in allocation 2, key 20 is in allocation 3, etc..
The physical defragging would reduce the number of allocations from 10,000 to a much smaller number, possibly as few as one. This reduces the overhead on the drive because fewer extent lookups and head seeks are needed to read the entire data.
The logical reorganization would put the keys in logical order -- key 20 in alloc1, key400 in alloc2, key1000 in alloc3, etc., but there would still be 10,000 separate physical file allocations.