Mac Stuck at Startup Screen with Grey Apple Logo,Empty Progress Bar and a Spinning wheel

Last night the electricity went out and my power surge protector was not working so my iMac just force shut downed.
So, when the electricity came back i turned on my Mac but it is *Stuck in the Startup/Boot Screen with a Grey Apple Logo,a Empty Progress Bar with stays for 1 or 2 minutes and a small Spinning Wheel which would Spin Forver! I Have tried the SMC and Pram reset but no use, i have also tried to insert my OS X Lion 10.7 Installation disk and it would not load if i hold the C Key in the Startup, I Have Managed to go to Disk Utility Through "Recovery HD" but the Volume "Macintosh HD" is Greyed out and Unmounted and i cannot repair it. There are some files that i'd like to Recover if there is a way to fix it without deleting files.
**PLEASE HELP ME FIX THIS!**
Details about the iMac:
iMac 21.5 Inch i think from Mid 2010,
OS X Lion installed maybe 10.7.2 or 10.7.3 (im not sure)

kernel
Grey screen with Metallic Apple and spinning gear
Sounds to me like your hard drive failed on you as a result of the power going out.
http://www.apple.com/support/imac-harddrive/
If your iMac is a Mid 2010 you qualify for the hard drive replacement program from Apple.
Apple has determined that certain Seagate 1TB hard drives used in 21.5-inch and 27-inch iMac systems may fail. These systems were sold between October 2009 and July 2011.
I hope I helped you with your problem.
- Brandon

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