You're probably right about the lease having expired, if the PC was unable to retrieve new IP details from a DHCP server (probably on your router) then it would default to the 169 address. Why it couldn't get new IP details though is an odd one, perhaps an issue with antivirus or software firewall on the PC or maybe the DHCP function stopped working on your router temporarily.
If it happens again you should try running 'ipconfig /renew' from the Win98 command line which will trigger a manual DHCP renewal and get new IP details.
If that doesn't work try inputting an address manually on your network interface from the networks control panel under the TCP/IP driver options, be sure the address you enter is part of the range used on your local network e.g. 192.168.0.110 if you use 192.168.0.x IP addresses using the default 255.255.255.0 subnet mask.
David NelsonTeam Leader
Business Support Unit
Zen Internet