Really sounds like the hard drive has failed and if that is the case then all your files are gone already.
If you could not boot to the Recovery HD partition then the physical drive is really screwed up or DEAD.
Since your Mac is from July it more ten likely came with Snow Leopard Pre-Installed. Get out your original system discs and boot from the OS X discs and un Disk Utility. If it see the internal drive then try a Verify and Repair disk. If you don't see the internal drive listed in Disk Utility then the drive is TOAST. Hopefully you have a time machine backup as you willl need to replace the hard drive.
As Bimmer posted you need to Replace the hard drive. You can do that yourself or have Apple or any other computer repair place do it.
Once that is done and OS X is reinstalled on the new drive th system will work again.
So does this mean my macbook is no good anymore or is there a way to fix it at all? If my physical drive was really messed up, wouldn't that show in the hardware test?
I wouldn't assume that's the hard drive. The fact that the screen turned blue all of a sudden isn't necessarily an indication of a hard drive failure. Check out this post I made yesterday:
My personal opinion would be to try and boot from an external hard drive with the appropriate OS installed. With a 2011 model, I would assume that should be Snow Leopard or later. AHT doesn't catch everything, and I don't know if it even does drive scans for bad blocks. I do know for a fact that it pretty much limits itself to digital interfaces and can't go beyond analog driver stages. For example, if the driver stages of a FireWire port or ethernet port are blown, AHT will report them as being OK.
If you got hit by a transient, which could indicate an internal supply problem or a line problem if you were connected to the internet via a wired connection or you were running off the charger, there's no telling what it might have caused the drive to do (if it's the drive) and it could easily cause the screen to suddenly go to blue, but what other damage was done?
My point is that you need to confirm what the source of the problems are. If there's a logic board problem, your drive and data may be OK. If the drive is bad, some of it may still be recoverable. The problem may very well be drive related, but I wouldn't go out and start throwing money at new parts without first confirming what the cause of the problems is.
Hope this helped, and good luck.