Windows ME is not a new OS. You had to have run into this directory before.
In short, it's the System Restore contents and short of disabling System Restore, booting a DOS disk and deleting it there, you will not be able to delete it.
There is NO BENEFIT to defragmenting this directory.
There are severe consequences to messing it up.
This is referred to Defrag ME. I had the same experience when I tried to defrag my C drive. It took a couple day. Then I exited but instead of reboot (shutdown), I accidently hit 'restart', I believed the system tried to do re-instoring and created _RESTORE folder in my C drive. I try to get rid of it but it does not allow me to do, say I cannot access to it. It said: 'Access is denied. The source file may be in use'. My PC is ME OS with 10 GB HDD. How can I delete this folder?