Perform a Factory Default Reset on the Time Capsule.
After the Time Caspule restarts, you should see a slow, blinking amber light after about 30 seconds
If you try the Factory Default Reset a few times and the Time Capsule will not restart correctly, then the Time Capsule has failed and it will need to either be repaired or replaced.
Repairs are possible. See the info in this link:
Solid amber indicates a failed hard disk.
The why could be a number of things.. I have noticed the old Gen1 disks go forever but the Gen2 1TB is a WD black caviar and they are dying in numbers at the moment. If it is bad, open the TC and just replace the drive if you want to keep it.
Nice clear instructions here.