hardware failure - What PC parts can produce bright flash, and smoke, with the PC still appearing to work fine afterwards?

I heard some strange noise from my less than a year old PC when it came back from 'sleep' mode;
For about 10-20 seconds I could see bright light visible through ventilation holes (somewhere near the back panel); gradually the fire/flash died down,
I could still smell some smoke out of it for the next 10 minutes afterwards. Upon opening up the case, I cannot quite tell where the burning exactly was coming from.

I had since turned it off and on several times, and had not noticed any obvious problems with it. Still all drives are showing, same amount of RAM, etc.

What component could have been burning like this? Will it do it again?

UPDATE: Thanks to all for the comments/answers: I have emailed the retailer (NCIX Canada) I got this PC from, with the description of the problem to see if their tech can take a look at it, as it sounds like I can't ignore it.

UPDATE 2: I had not tried everything indeed. Turns out the DVD drive connector cable was burned out; will see what happens now that both DVD drive and PSU got replaced ...

Answer

A burning capacitor could be your culprit. Regardless, if you saw a flash, or fire and noticed any smoke, the fact you've not noticed any problems simply means you've not yet tried to use whatever is broken. There isn't anything inside your computer that will keep on working happily after burning up. You should open up the computer and see what's been damaged. If you don't address the problem while things are working, you may have a small problem turn into a bigger and more expensive problem.

Good luck!