Sounds like the hard drive and/or boot sector is damaged.
Do you have the Installation Disk 1 or current OS X disk?
Run Disk Utility in Single User Mode
The best way is to boot for your original installation disk, and use disk utilities to "repair disk". If, for some reason, your installation disk isn't handy you can do the same thing by booting into single-user mode (by depressing the command (Apple key) and S keys at startup), which takes you to a terminal-like screen. At the prompt there, type the command: "fsck -yf" (without quotes and note the space). If it doesn't find the command, type /sbin/fsck -yf instead. If it complains about permissions type: "sudo /sbin/fsck -yf" and provide the admin password XXXXX prompted. If it finds errors, repeat this command until no errors are reported and you see the "...OK" statement. This check may need to be run up to four times on a system with serious problems. When you get the "...OK" message, type “Reboot”. Your Mac will restart and return you to the User Interface.
Now, sometimes the built-in utility won't be able to repair the file system itself. There are more powerful tools available, the best of which is DiskWarrior. This is not a free program, but it is an extremely good one and is often able to repair disks the Disk Utility cannot.
The possibility always exists that it is a real physical problem with the disk drive, in which case these utilities won't do much good, but it is more likely that it is just a corruption of the file system.