It's normal for the lens on a compact camera to make sound when the camera starts and the lens extends into its operating position. What you didn't say is whether it's making a new sound that it didn't make previously. (Question has been updated)
From what you describe, it's a good indication of a mechanical issue with the lens which may or may not affect its operation. If this wasn't a compact camera I'd say that it's worth getting it cleaned out anyway to protect your lens for years to come, but since it's a compact you may be interested in upgrading the camera instead.
A common cause of such a mechanical problem would be fine sand or dirt caught in the lens mechanism. It can be difficult to remove this without disassembly.
Non-sharp pictures may be a symptom of mechanical focusing issues but they could also be unrelated. Have someone at a camera shop look at it to get a second opinion.
But I'm going to have to say, your camera is an old compact camera inferior to newer cameras that are much cheaper. Paying any money at all to fix this would be, in my opinion, not worth it. You may as well think about upgrading.