This looks like a backlight uniformity issue.
This is where the screen isn't being evenly lit by the CCFL bulbs behind it. Some of them are outputting differing amounts of light and cause this perceived 'discolouration'. The lighter colours really do show it.
Unfortunately, this is one of the disadvantages of a CCFL backlight system as opposed to something like LED backlighting - backlight uniformity can become an issue, especially with time.
You'd be looking at a screen replacement - outside of warranty, that's gonna cost you.
I have recently added an LG FlatIron IPS234V LED monitor, 1920 x 1080, to my 2011 iMac, that I purchased from NewEgg for about $160. It connects to the ThunderBolt port through a DVI cable and a MiniDisplayPort to DVI adapter, both from Monoprice, for about $16.
After inserting the MiniDisplayPort adapter in the port, and turning the monitor on, the image appears without any changes to the iMac display. I am quite pleased with the combo so far, at what seems a reasonable cost. Windows can be dragged from one screen to the other.
I cannot say how this combo would work with a 2012 iMac. The additional display space remains active even if the monitor is turned off, until the cable is disconnected from the ThunderBolt port. This is disruptive for remote control, so I try to disconnect the cable before I leave the system.
I have seen the blue screens when I change the display resolution on either screen, but not otherwise.
Best Answer
Looks like the GPU is hosed to me. Try restarting it while holding down commandoptionpr and see if that helps. If not, try holding down commandoptionshiftpower button for 10 seconds to reset the SMC. If that also doesn't work, send it to Apple for repair.