Did you upgrade to the latest release Hardy Heron ?
Are you running the command as root or as a normal user ?

I would say that this is some kind of video memory corruption.
affecting to xserver-xorg-video-ati

** Changed in: xserver-xorg-video-ati (Ubuntu)
Sourcepackagename: grep => xserver-xorg-video-ati

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grep  -lir from / corrupts display
https://bugs.launchpad.net/bugs/210084
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