When you move between two chords, the change will sound smoother if the chords are close together on the fretboard, particularly if both are on the same group of strings. The way each note of a chord moves to the closest note of the next chord is referred to as voice leading.
This example demonstrates a simple progression played two different ways. In the first two bars, the chords are changed by moving a first inversion chord up and down the fretboard. In the third and fourth bars, different inversions are used for each chord in order to find voicings which are closer together. This produces a smoother sound and would generally be considered better voice leading.
Here is another voice leading example using broken chords. Notice how the notes of each chord progress smoothly and logically to the closest note of the next chord.