Yup, your optical drive is defective. If you are feeling adventurous I would say it's an easy DIY replacement.

From the ifixit website I have found the part you need:

MacBook 8x SuperDrive

And the ifixit take apart guide (assuming you have a Macbook Core 2 Duo):

Installing MacBook Core 2 Duo Optical Drive Cable

If DIY isn't your thing then I would (in my opinion) not take it to an Apple store because they do charge a premium for labor and repair. But they are usually the most reliable. So if money is not really a problem, go for the Apple store. But I would search around for an Apple Authorized Service Provider to see if they can do it for less.

Good luck!

thank you guys i'm going to call apple and find out exactly how much it will cost. I'll also read up on the DIY

Sometimes the optical drive is still functional but needs a clean up to do efficiently his job. When there's dust (or if you smoke, tabaco fume residue) on the laser lens the laser beam may not correctly read the disk and the result is that the optical drive will spit it out. So if your intention is to replace the optical drive yourself you could open the optical drive (4 screws) and clean the laser lens with a Qtip and alcool (apply a very small amount of alcool on the Qtip and clean the lens without applying too much pressure on it then dry the lens with the other Qtip end). It's also a good occasion to clean the optical drive mecanism with compressed air and check if the black textile protection at the entrance of the drive is well glued in place.

If you don't want to replace the drive yourself, compare Apple's price with iResQ.com. I've had good luck with them in the past. Looks like they want $298 for a MacBook Superdrive replacement, ouch, though that includes shipping back to you.