Mac screen turned blue with lines - hardware or software issue?

I currently have a MacBook Air (late 2011) that's running OS X 10.7.

It was working fine when I closed it to go get dinner, then when I came back I opened it and was greeted by the blue screen below

I've tried booting in safe mode and restarting but no change. I can still hear the sound pops when volume is adjusted and the screen brightness can also be toggled. Any idea if this is hardware/software and how much it's going to cost to fix?