Disk Utility Reporting Fatal Hardware Error

Hello all,
I woke up this morning to the flashing folder with a question mark in it on my MacBook. I know that that means the system can't find the OS so I assumed that my hard drive had magically failed overnight. So I turned my computer off and then rebooted and everything loaded properly. I went into Disk Utility and my main hard drive that has OS X on it is highlighted in red and when I click on it, Disk Utility only displays "This drive has reported a fatal hardware error to Disk Utility. If the drive has not failed completely, back up as much data as you can and then replace it with a working drive."
I have noticed EXTREMELY sluggish performance by my computer in these past two days which has required me to force quit programs and force shut down the system more times than I've had to in the whole time I've had this computer. Could this be a side effect of the failing drive?
I'm backing everything up right now, but I'm wondering how accurate Disk Utility is. The drive that I have in here is a non-Apple-installed 250 GB Western Digital that's been in here for nearly a year. Is it possible that the drive is failing beyond repair already? If so, is there any way to see the full extent of the damage and attempt to repair it before I go out and buy a new hard drive to replace it with?
Thanks for all the help and the fast responses!

Mateo wrote:
Hello all,
I woke up this morning to the flashing folder with a question mark in it on my MacBook. I know that that means the system can't find the OS so I assumed that my hard drive had magically failed overnight. So I turned my computer off and then rebooted and everything loaded properly. I went into Disk Utility and my main hard drive that has OS X on it is highlighted in red and when I click on it, Disk Utility only displays "This drive has reported a fatal hardware error to Disk Utility. If the drive has not failed completely, back up as much data as you can and then replace it with a working drive."
I have noticed EXTREMELY sluggish performance by my computer in these past two days which has required me to force quit programs and force shut down the system more times than I've had to in the whole time I've had this computer. Could this be a side effect of the failing drive?
yes, it could.
I'm backing everything up right now, but I'm wondering how accurate Disk Utility is. The drive that I have in here is a non-Apple-installed 250 GB Western Digital that's been in here for nearly a year. Is it possible that the drive is failing beyond repair already?
yes, it's quite possible.
If so, is there any way to see the full extent of the damage and attempt to repair it before I go out and buy a new hard drive to replace it with?
check the SMART status in disk utility as suggested. if it says anything but "verified" it means that the drive is expected to fail completely and you shouldn't try to repair it. If it says "verified" It's possible that reformatting will fix it so you can try that. this will wipe all the data on it so clone it off first as gbullman suggested. BTW, most drives come with manufacturers warranty longer than a year and you should be able to replace the drive. that's what I would recommend.
Thanks for all the help and the fast responses!

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