I'd normally think it's a GPU failure, but for this to happen overnight makes me think differently.
Have you tried booting in the failsafe mode? That's the first thing I would do, as well as reset the P-RAM (Hold COMMAND + Option + P + R) after pressing the power button, and wait until you hear the Mac Chime/Bong at least twice.
Safe Boot
Hold down the shift key after you press the power button until it comes to the login screen. It should say safe boot on the top of the login screen if you did this correctly.
Until you let me know what happens after you did this this is about all I can suggest, although if it still has these issues after performing these steps it could possibly be a GPU (the graphics card) failure. I don't know about the early '08 models, but if they were white instead of aluminium, the white iMacs see a lot of these