There has been a number of MacBooks with 120GB disks that has died. Not alarmingly high numbers, but too many to ignore completely.
I would have backed up whatever you can (you should always have current backup of all the data you cannot afford losing anyway) and then tried to repair the disk (boot from install disk or into single user mode and use fsck). Chances are there's nothing seriously wrong and the volume header is fixed easily (and that's not a serious error to begin with), but it could also be a (rare) case of an early warning...
cheers for the replies guys, doesnt sound so major judging from that link, but I'll re-back up my major stuff anyway. I'll be getting a 250GB HD soon anyway, hope that lasts longer than this one!