"This disk has S.M.A.R.T. errors. This disk has a hardware problem that can't be repaired

THis is the error message I get when I try to install lion on a mid-2010 iMac 27". "This disk has S.M.A.R.T. errors. This disk has a hardware problem that can't be repaired.  Back up as much of the data as possible and replace the disk" 
However, when I run disk utility, it says that the disk is fine. What should I do?
thanks in advance
A.

Disk Utility checks the disk directory that keeps track of all your files. S.M.A.R.T. status checks some hardware stuff and attempts to warn you before the disk just flat-out dies. The directory can still be fine on a failing disk but don't count on it staying that way if you continue to write to the failing disk. Make a miniumun of one copy of your data on the failing drive immediately. Two or more copies would be much better. Having only one reliable copy of your data is very unwise.
You can use Carbon Copy Cloner (donationware) or Super Duper! (free and paid versions) to make a bootable clone of your failing drive to use as one of your copies.  In System Preferences > Startup Disk select the clone as your startup drive. You can use the clone for your work until you can get your Mac in to have the hard drive replaced. When you get your Mac back Setup Assistant will be equally happy to restore all of your data from a Time Machine backup or a clone.

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