O.K. Don't panic, this is recoverable. First, what operating system version is on the machine? Second, try these steps:
1) Try to boot the computer is the single-user mode and try to fix it (a small Unix command line state). During power up hold down the keys command(the Apple key)+s (together) and the machine should boot into a command line interface. Wait until all the words fly by and you get a command prompt to type. At that prompt type fsck -f (for Panther) or fsck -y (for Jaguar). Please note the space between k -f(or y). Unix LOVES correct spacing. After you type the command the machine will try to fix itself. If it fails on the first time, do it again. When is comes back saying it fixed everything (or couldn't) then type reboot to restart the machine to the Mac OS X GUI.
2) Well, it looks like you may need a disk utility that is much stronger than OS X's Disk Utility. I personally recommend a program called
DiskWarrior. It has saved my bacon more than once (on some royal screw-ups on my Unix hacking). Note though, I strongly suggest staying away from an old disk utility on the Mac that royally screws up OS X systems (it starts with a N). It's bad news for OS X. There are numerous boards you can see that the companies product breaks OS X.
Oh by the way, a lot of good people are saying
TechTool has also matured to a really good disk utility. That maybe an option too.
3) If all else fails, insert the OS X install disk and do an Archive & install (I think that is what it's called). This will reinstall OS X Panther (or Jaguar if you are using that) but leave your Applications you installed alone. Then go to Apple then download the latest update to bring the system up to date. I say download it (than using Software Update) because the latest update will update you system in one sweep and seems to be more thorough than Software Update.
Now, you data is savable. You just have to take a possible extra step. Good Luck.