This error does NOT mean your hard drive has failed - in my experience.  I have a Dell Inspiron 5720 17 inch laptop that I purchased in July 2012.  So it is a little less than 3 years old.  My computer was displaying the circular cursor frequently, as if it was processing something, but it was just frozen.  

I started reading all of the forums, did some diagnostic tests, and what finally worked for me was rebooting in "Safe Mode with Command Prompt" and entering the CHECKDISK command with the fix / repair parameter.  It was:

chkdsk /f C:  (don't forget the spaces)

you can also try 

chkdsk /r C:

Some bad sectors were discovered and repaired, some indexes were removed and replaced, and now my laptop is fast and "spiffy" once again.

You may have to reboot a second time in "Safe Mode with Command Prompt" because you will get a "in use"  message.  Just answer yes and reboot again. (the old CTL+ALT+DELETE comes in handy here)

This was a whole lot easier and cheaper than replacing the hard drive.  Wow.  Saved me a bunch of time and money.

Good luck if you get this error message - Dell doesn't tell you exactly what it is or what it means - but they will tell you to replace the hard drive.

Chow.