Right, your MacBook Air uses PCIe based flash storage instead of a traditional hard drive or SSD drive.
http://technobolt.com/wp-content/uploads/2010/10/macbook_tearapart_2.jpg
Either that flash stick has malfunctioned or the connection it plugs in to on the logic board has malfunctioned. When did you buy the machine? Do you still have warranty remaining? If so, look up your local AASP and take the machine in for warranty repair. If you are out of warranty, you are just barely, call Apple and speak to a customer service representative and get an out of warranty exception to get this looked at/repaired.