Cs5 - images have weird grid-like/pixelation distortion i cant get rid of! help!

i've just downloaded the trial of photoshop cs5 (it took ages mind you!) and when i go to open (or create) a file that is larger (eg 1000x750 pixels) there is this weird grid that distorts the image (it's not the grid you can turn off and on or the grid that shows the actual pixels). when i open a smaller file there is no grid and the image is perfectly clear and normal - but when i zoom out there is a grid. also, when i'm zoomed out (eg 66% but sometimes from even 200%) the distortion happens, whereas if i zoom closer it disappears.
it doesn't distort the image itself, but distorts the colours in parts of the image.
i've experimented enlarging the canvas of a smaller image and placing a larger image into it on a different layer, but then the grid affects not only the larger image but the smaller as well, like it is stretching the colours to the edge of the canvas, or trying to pixelate/fuzz the image. however the grid doesn't affect the whole canvas, just the bits above and to the side of the larger images (mostly).
also when i zoom in/out gradually the squares of the grid enlarge and change size (both bigger and smaller).
so i don't know what the problem is, and any help/suggestions would be much appreciated as i need to use the program for a uni assignment due in a couple of weeks!!
thanks!

Hey- I have the same issue. When I started using cs5 I noticed this grid/distortion right away. At first I thought it was my wacom tablet (I use an Intuos 3) but its not. Its very annoying because I cant put my fingure on why this is happening. Anytime I ask a friend about it who normally knows alot about photoshop they tell me its that grid option thing which I have already turned off. I have included a screen shot of what the issue looks like. Any ideas anyone?

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