Windows cannot load locally stored profile.

Hi everyone Last night upon restarting my comp. The dialog box "windows
cannot load locally stored profile...." pops up. Upon reaching the desktop
most everything is gone( a few but not all icons, desktop image) and all of
my settings are gone. including IE7, realplayer, outlook express etc. I've
checked for restore points but they are gone as well. I've tried restarting
but everytime I do all settings are gone again. It's almost like the computer
thinks that it has started for the first time, and will not save any settings
on shutdown. Is this a hard drive failure???? If anyone has any advice, or
diagnostics that I could run your help is greatly welcomed.

thanks

SWAS