Flashing ? And white screen.. Now stuck trying to reinstall osx

Hi.

So, I've had this flashing folder with the question mark in and the white start up screen. I have managed to do a reboot with my mac start up disk in now.

The welcome box comes up but when I click on continue they are no duct her options as to where to install to.

I'm a fool, but I have years worth of logic studio work saved my hard drive which I never got around to backing up onto an external hard drive :-/.

I've looked on the net for hours and found no answer as to what I should do now. I've read somewhere that I need to go to utilities and erase the hard drive and make a new one? I'm really not clued up on this technical stuff.

So my question is, how to I get my mac working again from this stage without losing all my work? If somebody could point me in the direction of a thread that may help or has experienced this I would be most appreciative.

Please help!