What's wrong with my iMac?

For the past two days ive been experiencing graphic glitches. The screen in places goes really bright colours and pixelated. Here is a picture



Im worried

I hate to be the bearer of bad tidings, but the fact that you could take a screenshot (as opposed to pointing a camera at the screen) indicates that this is a logic board issue rather than something faulty with the monitor. I could be wrong, of course, but either way it's very likely to be a hardware issue.

Has the machine been under any undue stress (unusual heat or cold, or the possibility of a lightning strike, et al)? Although I don't think it will do any good, have you tried a PRAM/NVRAM reset (instructions here)? Have you run the Apple Hardware Test included on your original DVDs?

Ultimately I would recommend that you take the machine to either the place where you bought it or (preferably) the nearest Apple Retail Store for an exam. This looks like a hardware issue to me, and that means (regardless of whether you have a warranty or not) that's the only place that can fix it.

We have had a heatwave but I very much doubt it has caused this problem

I will do the PRAM/NVRAM reset now and the iMac shipped with no disk (Lion pre installed etc.)

It seemed to appear when I were using Expose and Space, I moved photoshop onto another desktop whilst playing 720p on Youtube

Update:

The problem goes away with a simple reset, but I've done the PRAM/NVRAM recent. If the problem persists, I'll take it to my Apple shop, thanks Chas