Sounds like your LCD panel is going bad. You can verify it is only the panel by connecting an external monitor to the unit - if it looks bad as well, then the graphics processor on the logic board has gone bad. If you are near an Apple Store, the Genius Bar can help isolate the issue for you for free if you don't have an extra monitor.

Unfortunately, the LCD and the MLB are the most expensive parts of this model, and due to its age I'm sure its no longer under AppleCare. If it works properly on the external display, that might be the least expensive option.