You're in New York, so set-up an appointment at the genius bar of your choice and bring it in ASAP! It doesn't matter if it's software, hardware, firmware, nowhere-based, that ain't normal!
We see this all the time in laptops in the shop, it's a video issue on the logicboard. Replacement is imminent, definately be sure take it to an Apple Store for replacement.
Out of curiosity... Had you attempted any Jailbreaking on this device?
Just future reference for other forum members.
PS: Watch the video from the PCWorld iPad Stress Test. This guy dropped it only a couple of times onto a carpeted floor from lap height on a couch and the screen got similar if not exact symptoms that yours has.
Only theirs was limited to the top portion of the screen, this is very indicative of a LCD panel ribbon cable becoming dislodged from the back of the panel that leads to the logic board.