If it is a virus, it is probably a Boot virus which AVG nor many anti-virus programs will catch.
Also, this could perhaps be some sort of screensaver downloaded with a game. Also, there are many not-so-nice practical joke programs some of which cause symptoms such as this.
The first thing I would do is contact the granddaughter and find out just what she did to the machine. What she did on the machine, e.g. what games, etc she used, sites she visited. As well as the very last things she did on/to the machine. If the problem occurred while she was using the machine and perhaps just didn't bring it to your attention.
Have you tried booting from a Boot or rescue disc, if available? Pressing Enter while this strange screen is up? If while this strange screen is up, if the mouse is functional, tried clicking on the "smiley?"
Probably the best place to seek help for this is at the Viruses & security alerts forum. They live for stuff like this. 
Charlie
My great granddaughter was playing some games on my computer, and when she left I thought she had turned off the computer so I tried to start it.....then I noticed a little square smilie face in the bottom left corner of an otherwise black screen.
The computer will not boot, not even to safe mode, it just does a partial boot to the smilie face.....Please help me
I do have an up to date AVG virus program installed on Windows XP Pro
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