Experienced the same issue on an older radeon card (radeon 8500)
following an automated update of xserver-xorg-video-radeon (update
manager suggestion). Solved the issue by adding some sections to the
auto-configured xorg.conf. Notably changing to the older "XAA"
AccelMethod appears to fix the issue:

Section "Device"
        Identifier      "Radeon 8500"
        Driver          "ati"
        BusID           "PCI:1:0:0"
        Option          "XAANoOffscreenPixmaps"
        Option          "AccelMethod" "XAA"
        Option          "EnablePageFlip" "true"
        Option          "TripleBuffer" "true"
EndSection

Section "Monitor"
        Identifier      "Configured Monitor"
EndSection

Section "Screen"
        Identifier      "Default Screen"
        Monitor         "Configured Monitor"
        Device          "Radeon 8500"
EndSection

-- 
font corruption with xserver-xorg-video-ati driver
https://bugs.launchpad.net/bugs/475428
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which is subscribed to xserver-xorg-video-ati in ubuntu.

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