The day after uploading our Christmas pictures (and deleting them from the camera), M called me at work.
"The Mac is frozen up," she said. "The cursor moves, but nothing else is working."
"Go ahead and power it off," I said, "and then power it back on."
Fifteen minutes later, she called again. "It is showing a gray screen with a spinning icon."
"That just means it is checking the disk for errors. Let it finish and it will be fine."
Two hours later, when I got home, it was still "checking" itself. Not good. Some command-line trickery later, it had fsck'ed itself multiple times and declared that all was well, yet it still would not boot. Apple hardware diagnostics showed no problems, and then, mysteriously, the drive failed to show up at all. MicroCenter to the rescue!
Using step-by-step disassembly directions from www.ifixit.com, I put in a new 500 GB caviar blue drive, installed Tiger, then upgraded to Snow Leopard. In the meantime, I put the ailing drive in a SATA dock and ran DiskWarrior on it, which rebuilt the directory (and DiskWarrior warned, "Recovery slowed due to drive malfunction"). Tonight, I will see how effective my backup via Time Machine/Time Capsule has been.
Having all your music, video and pictures in a digital format is awesome, but it carries with it certain risks. What if our house burned? Our backups are in our house. You could try backing up "to the cloud," but who is going to push 50+ gigs of data and pay a monthly fee to house it?
Another option--hang an eSATA/USB 2.0 dock off of the Time Capsule, and archive backups to a standard SATA drive quarterly. Put that drive somewhere safe and offsite, like a safety deposit box, or in a car trunk.