I have gnome as my default session, and I go into X windows, and bring up a
terminal, if the mouse cursor is in the terminal window, and I start to
type any text into this terminal, I get this block of distortion. What it
looks like is that a menu is trying to open but visually you cannot make
anything out!!! If you move the cursor out of the terminal window, and
start to type, this does not occur.
I have not seen this behavior in Afterstep and or KDE, etc..... it appears
to happen in gnome only. It is VERY annoying.
What type of terminal are you running (gnome-terminal, xterm, rxvt)?