It is most certainly a bulging battery. I wouldn't power on the machine anymore or plug in the laptop until it is fixed. Is there an Apple store around there? This happened to Tim's laptop a few months ago. It was 4 years old and Apple wouldn't replace the battery but they (for free) took out the battery and now it can be used without a battery (it has to be plugged in). I also had the option to have it replaced fro $129 I believe. Since I didn't use the laptop, I decided to just have it removed. If you fix it yourself, I would be very careful not to damage the battery. There is a reason it is bulging.