This is not good. Spray some window cleaner on a soft cloth and clean the installation disk. Then try start from the CD again.
Resetting the Power Manager
If the computer is on, turn it off.
Restart the computer by holding down the reset button to the left of the Serial port for 10 to 20 seconds.
If the computer does not restart, repeat step 2 three or four times.
Resetting the Power Manager and PRAM
Resetting the parameter RAM (PRAM) when the computer is shut down also resets the Power Manager. The following process resets both the Power Manager and the parameter RAM.
If the computer is on, turn it off.
Make sure the Caps Lock key is not down.
Restart the computer. Immediately after hearing the startup sound, simultaneously press and hold Command-Option-P-R. (If you do not hold down the key combination within 5 to 10 seconds after the computer restarts, you must repeat steps 1-3.)
Hold down the keys until you hear the startup sound again. Then release the keys.
If the computer shuts itself off, press the reset button on the back of the computer to turn it back on.
When the computer has finished starting up, restore any custom settings.
Get to another mac and start up in target mode. Connect via firewire cable, start the bad machine holding down the "T" key. It should bring the hard drive up on the other machine. Get your data off first. Then run disk utilities. Also check remedies listed on Apple's site for gray screen: http://support.apple.com/kb/TS2570