Nikon d 40 will not focus, but pictures are clear

There's a diopter control near the viewfinder to adjust the viewfinder to your eye. Try adjusting that while peering into the viewfinder and try to get the focus brackets and the data at the bottom of the viewfinder into focus.

The most likely problem is that you've switched the focus from "auto" to "manual". If you're using the 18-55mm kit lens, check the barrel of the lens for a switch that is labelled with an "A" and an "M". Slide the switch towards the "A" and your photos should be in focus once more.
If you'd like to keep your lens in manual focus, twist the end of the barrel while looking through the view finder to focus.

There may be a fault requiring service (probably not economically viable if they won't do it under warranty), but before you go there, does this camera have a "Macro" feature? This is usually represented by an icon that looks like a flower. If you have set that on, the camera goes into an extreme close-up mode and won't focus on items at normal distances.

Adjust view finder focus as you will see setting there, to view correct focus in view finder itself.
Camera is just fine because it is taking good focus pictures.

Seems possible that the servo control /main processor control is faulty and will need help from Nikon service , It will be better to get a evaluation for the fault and so we can have a consenses on the fault.
get estimate and decide.

There's a diopter adjustment control just to the right of the viewfinder. Try adjusting it while looking through the viewfinder.

Is your shutter speed fast enough? If not, you'll need a faster shutter speed or a tripod.

Are you using the proper focus sensor? Is the entire image blurry or just portions of it?

What happens if you focus manually? If it comes out sharp, then there's a problem either with the lens or the autofocus system on the camera. Have you tried it with a different lens?

Is the AF switch on the lens set to A?

Try pressing the shutter button half way to let it focus before you shoot. You also may want to make sure the camera is in auto mode and not set to any particular setting.

jbenjack,
The D80 has a lot more settings to deal with and depending on the lens the depth of field may explain the blurry background (that is desired effect on a portrait) The view finder on the D80 is for composing the shot and has read outs for the settings. The LCD on the back is for playback and the menus, it doesn't work like a live view of what's being taken (on some newer and more expensive DSLRs it does preview on the big LCD) on smaller point & Shoot cameras that don't have a viewfinder they use the LCD as the viewfinder, does that make sense? If she has the manual you may want to faniliarize yourself with some of the features, start out on one at a time for the different modes so they make more sense, you can really appriciate the camera after that and respect what pro photographers do. The D80 is not a cheap camera and I personally know a couple of professionals that use it among their cameras. (lots of different lenses that cost many time more than the camera body) Have fun with it, and if you get into it you will find you can take some fantastic photos with it. Can you tell that I like that camera?
randy320sgi

Try adjusting the viewfinder diopter. It's a little wheel next to the viewfinder that adjusts to your eyesight.