Hi,
Yep, definitely check that you haven't disabled any fonts using Font book or whatever. That's what had happened when I encountered the same thing the other day.
You can check it by going in to Window settings (under Terminal) and selecting the 'Display' option on the popup menu. If the 'Text' field displays any gobbledegook, or a strange name and/or a weird pt size for the text then that's your problem. The font is missing.
The default is Monaco Regular 10pt.
Hope that helps!
Edit:
Also, you may find that trying to change the font to something else doesn't work, neither changing the font name or the size was possible when I encountered this, I had to enable the Monaco font before it worked. Kind of a glitch there I guess.
Cheers,
Rick