I have a problem with my old Marshall Valvestate 8010 10 watt guitar amp. When I turn on gain, and turn the gain knob around 50%-100% I get this sound and diodes D1 and D2 blinks according to the sound. I've taken out the circuit board, and nothing looks broken or burned. Any ideas? Here are the schematics.
Well, looking at the schematics it looks like turning on the boost switch (assuming that's what you mean by turning on the gain) sends the signal through a couple of diodes at the second pre-amp stage to create a square wave to create distortion. Your recording resembles a signal overload, so the places to check would be the 10k R2 (resister 2) for failure, or more likely a failure of the second IC-1458 (ic1b) although to be honest just about any of the components could have failed, but most likely in the second gain stage (any of the resisters).
Usually an oscilloscope and a signal generator is use to check the components and trace the signal to the failure point. The 1458 op amp is pretty cheap (less than a couple US dollars) and the resisters cheap as well, so if you're good at soldering you could start swapping out components just to see.
Thinking about it, it could be a problem with the gain pot. If the problem starts at a specific location on the pot (rotate back and forth and see if it is gradual or instant problem) then changing the pot out may fix it.
Amplifier circuits are one of the first things discussed in basic electronics, so looking up Introduction to Amplifiers or Basic Amplifier Electronics would give you a better idea of what is going on.