Explorer is not running or corrupted.
Try typing "explorer" in New Task in Task Manager.
If works:
Explorer not running at startup. Check the following registry key
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows NT\CurrentVersion\Winlogon
Shell needs to = Explorer.exe
Userinit needs to = C:\WINDOWS\system32\userinit.exe,
If not work:
If you can find a good copy of explorer on your CD or in a Cab, you may be able
to replace it using Safe Mode with Command Prompt. But more likely, you will have
to do a System Restore, or repair/reinstall Windows from the CD to fix this.