VM System Event Error: The device has a bad block

In my Event Viewer->System logs, I spotted the following error "The device, \Device\Harddisk1, has a bad block." It has occurred several times in the last month, usually in the early morning. For what it is worth, we run a Backup Exec job usually during those times, but they've been completing successfully.

I'm running ESX\Vcenter 4.0. The Guest is Windows Server 2003

It's odd (to me, a relatively new user) that a VM could generate Hardware errors.

Any suggestions on what to do or what to look out for?

thanks