I'm an antique tech at this point, being 10 years into retirement, but
here is what I found in the past...

If the drive gives that message more than once you might as well buy a
new one and transfer the data over to the new one. Hopefully you will
still be able to access everything. What that will do to Win7 I do not
know. I bought XP and that's where I'm staying for occasional use.
After it's end of life in 2014 I will try not to use any Windows.

The conventional wisdom is that a hard drive should last about 5 years
but I've had them go in two - just off warranty. Repair? You must be
joking! There are clean room shops that will take a drive apart, copy
every byte and fix the bad ones, put it on a brand new drive and
charge you several thousand dollars. Not an economically sound choice
for most of us.

Used to be you could get a good overview of your Hard Drive's
condition by running scandisk and looking at the big red "B" for bad
blocks markers on the lo-res graphical picture of the drive. I don't
think that's available any more but possibly some utilities (Norton?)
may provide it. What is observed is that IF the problem is hardware (a
part of the surface has flaked off) and it's not on a critical area
like the boot sector, THEN it is often possible to continue to use the
drive, possibly for years. However, once they start to go it is just a
matter of time, possibly years but maybe hours, until the problem
spreads and you definitely do lose significant amounts of data - or it
just won't boot up.

If it is a software issue (a bit that was inverted by that one in a
trillion O/S mistake) then standard tools like fsck may fix it, or at
least make the drive usable. I'm sure you are aware that every hard
drive is shipped from the factory with a few bad sectors but there are
spare sectors that are mapped onto that location to make it appear
perfect. The same thing happens when fsck, scandisk etc are run: they
detect the unrecoverable sector/block and map in one of the spares so
the problem appears to go away. It does slow down disk access and
eventually all the spare sectors are used up but hopefully things are
problem free for that desired 5 years.

The bottom line is that it is far better (and cheaper) to replace the
drive as soon as there is any sign of trouble. That's why I replace my
drives with new ones every few years. It's my way of backing up, and,
no, it isn't foolproof but I haven't lost anything through hardware
failure for a long time. Through stupidity, yes, fairly often!