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Is your machine an iMac DV 400 model? When you run Apple System Profiler, does it list your video card as an ATI Rage 128 VR? If so, Apple has had problems with the OpenGL driver for that model/card since Mac OS X was introduced. Several OpenGL developers (particularly game developers) have encountered problems on that particular configuration. These problems have ranged from kernel panics to display anomalies (such as what you are seeing). Apple is aware of the problem (has been for quite a while), but has not fixed it yet (as far as I know).
If your machine is not that particular model and you do not have that particular video card, please let us know so we can investigate further.
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