My Sony Vaio laptop apparently picked up a virus when I tried to use a hotel internet recently on vacation. Now when I start it up, WindowsXP begins like normal, but afterwards I am left with a screensaver and no icons to click on. The arrow still moves around. Is reformatting my only option? I've tried starting it up while holding down the Control key which gives me a few things to try (debugging mode, etc.) but I am still left with the same result. Any suggestions would be greatly appreciated.

Have you tried going into Safe Mode?

Did your laptop come with Restore CDs? If so, use them to Restore to Factory settings.

Often reformatting can be the easy out as long as you don't have a ton of important software and data that will be time consuming to replace.

Things to consider are: Do you have a system restore cd from the manufacturer or is it included as a separate partition? If the restore data is on a partition, there is probably a key you have to hit during startup to access it. You should visit your manufacturer's website or read the manual to determine this.

This does not look like a virus, appearently, the windows needed repair. Here are some of the options you can do besides formatting:
1) use system restore via f8, f10 or whatever your bootup key is when you start your computer (you'll be entering safe mode)
2) installing windows on top of the one you have
3) try other utilities like norton symentec to check on your hd/os

If you cannot enter into safe mode, your options will be very limited. If you can try to restore your registry (you did have it backed up right? I know you didn't :P) Formatting is the last solution and of course, the easiest way out.

Some interesting, if jumbled advice.
As Scott was saying a factory restore maybe your only real course of action.
The problem with this is that it WILL completely wipe your computer clean.

If you have data that you need, try a repair install for your XP first, may just do the trick ;)
Here's the official Micro$oft way of doing a repair install,
And Here's one with screen shots.

Basically this installs windows over the top of your current setup.
So you don't loose any information you already have.