After the boot up, for some reason, the CPU could not find any valid code to run and was sent to an address with 00 in it(the BRK opcode), when this is the case it jumps to the TIM (terminal interface monitor). This reports the contents of the CPU's registers, it is also a very useful monitor for inspecting memory, loading & running programs etc.
Possibly this represents corruption of some bytes in the ROM's holding BASIC.
Try typing X which should exit the TIM and go back to BASIC, if BASIC is working that is.
There was also some modification that caused the computer to go directly to the TIM after power up, so if BASIC works when you exit to it, maybe this PET has that mod.
www.c64-wiki.com