In all probability your HDD in the laptop (more specifically the electronics in it) is dead. I wish it is not true and would like you try whatever you can.
I know of atleast one instance where a similar problem was resolved. But that machine was a custom-built desktop, using one of the recent motherboards with UEFI BIOS. The user changed the optical drive setting from AHCI to UEFI and the I/O error vanished. He was then able to install Windows 7. This however may not be applicable to your DELL laptop. ( I am mentioning it here so that those who read this thread and post are aware of this so that they can help others who face a similar problem with UEFI bios.)
Coming back, you have neither mentioned the model number nor Windows 7 edition that came preinstalled in your DELL Laptop.
In case it is still under warranty/extended warranty, the right thing to do will be to contact DELL Technical Support and avail the warranty service.
Out of warranty, you may decide 1.to go with DELL paid-service or 2.change the HDD yourself or by any other Professional Service Agency ( in case it is confirmed that your HDD indeed has failed.) and clean install the Windows 7 edition for your laptop. (using the COA key on the sticker)
If DELL does it they will clean install the Windows 7 with the OEM Reinstall Disk that will maintain the OEM preactivation/selfactivation/autoactivation.
At this point I would also like to mention that you can try and get the OEM Reinstall Disk by filling in the Media Request Form here https://support.dell.com/support/top.../backupcd_form
and submitting it online.
(Lost your Windows discs? How to get replacement media, legally | ZDNet
( You may also buy these from reputed Computer parts Vendors for USD 12-15.. These carry the appropriate DELL Part No. and appear to be genuine -from the picture on their website.)
( I got the DELL OEM Reinstall Disk on request from DELL with which I can clean install (without any bloatware) and it will autoactivate. )