that's malware. Your icons and folders aren't gone, just hidden, pull your drive, put it in an external enclosure, take it to a freinds house, go to control panel>folder options and tick "show hidden files and folders" under the "view" tab. This will allow you to see your files again. After you back up all the stuff you want, go ahead and re-install windows.
alternatively you can attempt to clean the malware off with this tutorial http://www.bleepingcomputer.com/virus-removal/remove-windows-recovery
I've always found it easier and cleaner to back up and wipe but it's up to you.