This has happened to me on an iBook G4 at school running Panther.  
Turns out it was the hard drive needed to be replaced. And  
unfortunately, PowerPC macs cannot boot from USB drives :(
There are hacks using Open Firmware to make a PowerPC mac boot from a  
USB device. Google search "Boot PowerPC mac USB." If that method does  
not work, install CD's may be the only hope. From We Love Macs, you  
can get a 10.1 upgrade CD for $5! Simply boot the CD and run disk  
utility to try to repair the drive. You may also want to check into  
DiskWarrior (http://www.alsoft.com/diskwarrior/). It is a bootable CD  
that can repair a drive completely without losing data. IT is very  
useful and has a high success rate. 

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