Macbook Damaged Hard drive?

Hello,

Recently my Apple Macbook has passed the 1 year warranty mark. I have been expiriancing many problems with it such as, problems booting, Grey screen saying I need to shut down Macbook, and Just today, I was trying to install Mac OS X Lion, on my hard drive. I succesfully purchased and downloaded lion installer, but when i tried to write it to my hard drive, i recieve a screen saying My Hard drive is damaged and cannot be repaired...

Although, i am very confused because i was able to run Mac OS X Snow leopard 10.6.8 and Mac os X lion Beta (developers version) on my mac. I went into disk utility and tried to repair the disk but it did not work. I am un-sure of what to do because, i do not have an Applecare protection plan nor can i afford one at the moment. Apple has denied to speak with me about the problem and the nearest Apple repair store is too far to go just any day.

Can somebody help me or give me some suggestions please?