It sounds like your hard disk either died or is corrupted.
Do you have either an install disk or recovery disk for Windows 7? Not to worry if you don't, you can download one -- the same version that is on your Windows 7 authentication key sticker.
I would download and run the Hitachi drive fitness test on a bootable CD or USB to see if the drive is dead. If the drive is more than a couple years old that is certainly possible.