Time Capsule
According to AirPort Utility, my Time Capsule has an "internal disk needs repair" error. I restarted my Time Capsule but that didn't solve the problem. Now what?
Time Capsule-OTHER
Everything depends on how old it is.
What model and how long ago did you purchase it?
Sometimes on more recent ones.. if you leave it off overnight .. to fully cool down it will be all good again.. it is merely aberration.
Still not nice.. but happens especially on the AC ones..
But there are plenty of dead hard disks around. All AC are under warranty.. get it replaced ASAP.
A Gen4 TC under warranty is more likely to have lost format.. if you want to attempt recovery (and are out of warranty or files are too important).. pull out the hard disk and put it in a USB holder.. run a disk repair utility on the computer.. I like data rescue 3 better than disk warrior but both are used.. they are not cheap. You can recover files pretty well if the disk is actually lost format.
Data Rescue offers a demo which can test the drive and show if there are files that can be recovered before you pays your money.
Earlier TC.. Gen2 it is a dead drive.. no hope of file recovery generally.. same pretty much on Gen1 but poor power supplies could affect either.
Gen3 is a half way.. they used samsung spinpoint drives and not wholly reliable.
Instructions for disk removal here. http://www.ifixit.com/Device/Apple_Time_Capsule