Just got mine back from being repaired because of this problem. Its a hardware problem and mine ended up needing a motherboard replacement and I got mine back with a reformatted hard drive but I already switched out my 500gb hdd with the stock 60gb so that didnt bother me. Luckily I got my ps3 at Target and bought their 3 year warranty for $30 and plan on extending the the warranty for another 3 years after it expires, cant beat $30 dollars for 3yrs. Not sure what sony will do but they will probly reformat your hdd,you should call and ask if they really need to reformatt your hdd. If so you could buy a cheap external enclosure for the hdd and plug it in your computer to copy all the files or buy a replacement hdd rather it be a cheap 20gb maybe $10-$20 or go for a 500gb about $120 and put that one in before you send it in. Thats my opinion anyways if keeping your files are that important. Curious which ps3 system do you have and how long have you had it? Seems like the 60gb ps3 are dieing after a couple years. My 60gb died after a year and 3 months but I have it on almost 15 hrs a day rather Im playing it or family or watching movies on it off my 120gb externall hdd so I really put it to use.