A very strange display problem on my laptop.

I hope you guys can help. (I am using my computer right now) Yesterday morning my laptop (running on vista) was working just fine. I checked my email, and then I set it to hibernate. I always put my laptop to hibernate, as doing a full startup takes more time. That evening I turned it back on and I immediately noticed something was wrong. I don't remember well, but I was looking at an error page, and I think it had something to do with memory. I force-shutdowned the laptop and then restarted. Then I couldn't even describe what I was seeing in words so I decided to film this morning to show what it looks like:

http://www.youtube.com/watch?v=HesyOKsqX8s

(yes you can see my reflection in the beginning) That resolution is MUCH lower than what I had before (1280x800) and the colors are much lower as well. There are weird lines across the screen, and also, notice the error I receive.

I have tried (since the laptop still has some functionality):

-Setting display settings back to 1280x800 and 32 colors. when I press "ok", the window "do you want to keep these display settings" pops up but it is as if I didn't do anything. Same resolution and color.

-Restarting multiple times (including safe mode) and got same results.

-Removing the battery. Same results.

-Uninstalling display driver and reinstalling. (nvidia geforce 8400m gt) Nothing happened. (I uninstalled, restarted, and after I turned it back on the computer automatically installed the driver for me after a popup: "detecting driver software" or something)

-System restore to 6 days ago (when I first started up my laptop, a bubble came up saying "windows has installed new updates" so I put the restore point past before the previous one). Did not fix.

-Running full scan from AVG. Found nothing.

I have no clue what is going on with my laptop. Help will be greatly appreciated.