I did do a system restore point when I initially found the issue a couple of days ago but it did not really do anything and I am suspecting it is something a fresh install of Windows will have to fix.

I did the system restore operation and it fixed it... somewhat. I still encounter some lag when loading DOSBox games and I encountered some strange hiccups when running GZDoom with the Brutal Doom mod that I haven't encountered before.

DOSBox lagging is not uncommon when running on the newer 64-bit operating systems so it may not be an issue with the laptop itself. Fastest way to check is to try running a higher end more modern game that typically would not run on the older systems. If you find that the game runs smoothly then you can safely assume your system is fine and the only issue you are now left with is being penalized by modern technology like the rest of us :)

If those numbers are when the system is under stress (ie. playing a 3D game), then they seem quite good, especially for a laptop.

One clarification from my point to the question "does your laptop feel hot?": people must remember to make a difference whether the air coming out of the laptop feels hot, or whether it is mainly e.g. the keyboard or other parts of the laptop which feel hot upon touch.

I think it is just a good sign if the outcoming air feels hot, because that tells you that the ventilation is working and the fans are able to push hot air out of the laptop.

This just because before I've seen some laptop users complaining about the hot air coming out of their laptop, "Is it normal?". It is not just normal, but very much desirable. :)

I didn't check the numbers when I was running a 3D application, mostly because I expect them to rise a bit when running a game. I can say though that I can feel hot air coming out of the vents and when the keyboard feels warm is when I have played a resource demanding game like Left 4 Dead 2 for a while, like at least a couple of hours or so at max. Not sure if that sounds good but again, I haven't had my computer shut off because of overheating before, even when I did suffer some heating issues a year ago that I managed to fix.
I would love to use the DOSBox having issues argument but when less resource demanding games that have system requirements that my laptop far exceeds lag and skip, that is a problem. It also doesn't help that these DOSBox games were working fine before, even games like Blood and Daggerfall ran in a more than playable state with only an occasional framerate jerk or bout of lag. Now they are darn near unplayable with the games skipping continuously when playing.

Edit: I did try Nights into Dreams HD and Brutal Doom and they have some strange pauses that weren't there before. Brutal Doom pauses after doing any action and Nights has this strange delay when loading stages and music for some reason. Those are the only resource demanding games I can really try at this moment so there may be more to it.

Edit Part Deux: I kind of fixed the issue, keyword is kind of, I defragged my machine with Defraggler and it kind of improved things to a degree though the pauses are still kind of there from time to time. I haven't found a complete solution yet but I am getting somewhere.

Hmm. Maybe we are looking at this from the wrong perspective. Aside from the ideas already tossed around, it could be simply a sound card driver issue. I have had games in the past that would bog down entirely due to the game trying to access a specific sound file. Hard to say it is just a certain file in your case, but perhaps just the sound in general would be the most likely guess.

Have you made any recent changes to your sound card? Perhaps updated a driver (which can be rolled back using device manager). Have you installed a new audio device or connected new speakers to your laptop since the issue began? Or perhaps installed any new programs recently, particularly something that would be audio intensive?

If its doing this on all games and not just older ones then I would definitely say it is more of a sound issue than a graphics one. Especially if the games are lagging randomly and not just at specific points. Curiosity has me peaked at the moment so looking forward to updates.

I did a system restore so I haven't updated my sound card drivers yet... but maybe updating it could help? Not sure.

This .. could be helpful reading ... It is about optimizing system for gaming and covers quite a bit ... might discover problem solution .
http://www.geforce.com/Optimize/Guides/stable-gaming#1

edit ....It is not just regarding Geforce as is generic as well

I have a DV6 which I used to game on and to get best performance out of it I had to change the power management settings. Go into your control panel and select power management, then set it to high performance mode. I found that with older games it would be running with reduced performance and cause issues.

Hey everyone thanks for the help, I have determined what the issue is and apparently my hard drive may be failing on me. I got a hard disk error at startup and I am noticing that it is taking longer for my PC to start up anymore which makes sense considering that anything that requires disk access is lagging.