The recommended best practice is to assign a SQL Server Transaction log file its’ very own disk or LUN.
This is to avoid fragmentation of the transaction log file on disk, as other posters have mentioned, and to also avoid/minimise disk contention.
The ideal scenario is to have your DBA allocate sufficient log space for your database environment ahead of time i.e. to allocate say x GB of data in one go. On a dedicated disk this will create a contiguous allocation, thereby avoiding fragmentation.
If you need to grow your transaction log, again you should endeavour to do so in sizeable chunks in order to endeavour to allocate contiguously.
You should also look to NOT shrink your transaction log file as, repeated shrinking and auto growth can lead to fragmentation of the data file on disk.
I find it best to think of the autogrowth database property as a failsafe i.e. your DBA should proactively monitor transaction log space (perhaps by setting up alerts) so that they can increase the transaction log file size accordingly to support your database usage requirements but the autogrowth property can be in place to ensure that your database can continue to operate normally should unexpected growth occur.
A larger transaction log file in itself if not detrimental to performance as SQL server writes to the log sequentially, so provided you are managing your overall log size and allocation of additional space appropriately you should not be concerned.