For anyone else with this problem, I just found this bulletin on the Sony product support website. It is a problem with the CCD that they will repair for free. http://esupport.sony.com/US/perl/news-item.pl?mdl=DSCP10&news_id=118

There is distortion in camera and movie modes. It shows up on the display and in the pictures themselves after I download them to my computer. I'm wondering if there's some dust somewhere that might be causing the problem. I can take a clean picture when everything in the shot is dark, but as soon as any light enters the frame, I get the distortion. Thanks for your time considering my problem.