A clarification/distinction needs to be made between logical and physical disk failure. In your case, I can say with 95% certainty it's the latter. The two are not mutually exclusive, however.
A logical failure involves a corrupted filesystem, where data is improperly written and thus improperly read from. In some cases, you can repair the filesystem from either a seperate partition (IE, disk utility on your recovery partition), or, even better, from a seperate drive using the same method.
A physical failure is, as it sounds, irreperable damage to your hardware....the drive itself - whether the platter or the head. There is no troubleshoot for this. The only solution is a new drive.
Logical failure is often a symptom of physical failure, even moreso if the problem is recurrent. Only after the latter is addressed can the former be taken care of.
You will find more favorable prices at Amazon, Newegg and the like than the Apple store. Additional savings will be realized by installing it yourself and eliminating the labor charge.