Binary package hint: xserver-xorg-video-ati
Since the updates a few days ago on gutsy, my screen shows horizontal tearing streaks with only the mouse pointer shown normally (see http://launchpadlibrarian.net/9255354/00001.jpg). This is on a radeon 9250.
Usplash is displayed normally, gdm and gnome are scrambled.
This problem was first seen on Gutsy with the upload of the 1:6.6.193-1ubuntu1 ati driver, and worked fine on Feisty and Breezy. Downgrading xserver-xorg-video-ati to feisty's 1:6.6.3-2ubuntu6 fixes the problem for me, so the problem must be in the changes between that version and 1:6.6.193-1ubuntu1.
[Workaround]
Disable 3D (including Desktop Effects) by adding this to your Modules section:
Section "Module"
...
Disable "dri"
EndSection
If the above does not fix the issue for you, then you are not seeing this particular bug, and should report it separately.
UPDATE:
Try setting 'Option "AGPMode" "4"' to the Device section.
Many people with ATI graphics cards report the same or similar problems:
http:// ubuntuforums. org/showthread. php?t=526947 blogs.sun. com/richb/ entry/latest_ ubuntu_ gutsy_updates_ blew
http://