If you click the area between the dotted line, can you see the photo?
Then probably the thumbnails in your iPhoto library are corrupted.
Assuming your iPhoto version is 9.5.1 - if not, post back.
Try to rebuild the thumbnails:
- Hold down the option and command keys (⌥⌘) at the same time and double-click the iPhoto icon.
- From the window that will pop up use the "rebuild thumbnails" option.
If you do not have a current backup of your iPhoto library, it would be safer to make a backup, before you try this.