Hello, It's likely that the Hard Drive has failed on this unit. You can try the procedure below to see if it will correct the problem, but if not, then you will need to either replace the drive yourself or have Sony's PS3 service center repair the unit.
Hard Reset procedure for the PS3 (as instructed by Sony CS).
Be sure to backup your settings/games saves by doing a System > Backup on your PS3 or you may lose your game saves!1. Power Off the PS3 via the power switch in back and power back on w/switch.
2. Hold Power Button on the Front until you hear 3 beeps.
3. Then go through the initial setup and then run a full Format via System > Format. (will take approx 3 1/1 hours). You may need to have our AV cables ready if your using HDMI (in case HDMI isn't detected after initial reset).
4. Restore your backup you made prior to doing factory/hard reset (optional, if you created a backup).
If a hard reset does not work, then most likely the Hard-Drive will need to be replaced as this is a very very common problem among these units. This is something you could do yourself, or send into the PS3 service center. I can send you the link if you'd like.