That means the drive has most likely failed and needs to be replaced. At this point your options for recoverying data are few:
General File Recovery
If you stop using the drive it's possible to recover deleted files that have not been overwritten by using recovery software such as Data Rescue II, File Salvage or TechTool Pro. Each of the preceding come on bootable CDs to enable usage without risk of writing more data to the hard drive. Two free alternatives are Disk Drill and TestDisk. Look for them and demos at MacUpdate or CNET Downloads.
The longer the hard drive remains in use and data are written to it, the greater the risk your deleted files will be overwritten.
Also visit The XLab FAQs and read the FAQ on Data Recovery.
If recovery software does not work you would have to send the drive to a data recovery service such as Drive Savers. They are quite expensive and provide no guarantee of success.