Sonny is wild and unruly, Michael is smart and business-like, and Fredo (John Cazale) is weak. (This becomes more obvious in The Godfather Part II.) The Corleones send Fredo off to Vegas, where he quickly causes problems for their business associate Moe Greene ("He was banging cocktail waitresses two at a time," says Moe. "Players couldn't get a drink at the table!").
So Moe slaps him around. Unfortunately, given that Fredo is a Corleone, this doesn't work out so well for Moe, who refuses to sell his casino to Michael and winds up as another fatality when Michael cleans house at the end of the movie.
But Fredo himself makes the mistake of defending Moe, which leads to Michael's rebuke:
"Fredo, you're my older brother, and I love you. But don't ever take sides with anyone against the Family again. Ever."
You'll have to watch The Godfather Part II to see if Fredo manages to take that advice or not.
P.S. John Cazale, the man who played Fredo, is actually kind of a legend. He only made five real movies before dying too early...but they're all masterpieces.