I have a nikon 55-200mm lens for the D40X digital camera. The pictures I take are blurred. I use the auto settings. the 18-55mm lens works fine and there are no problems with the picture clarity. Is the lens out of adjustment??

One of a few things might be happening
1. Photos being taken at high zoom (i.e. 200mm) are susceptible to camera shake, even though the lens is focusing properly. The solution here is use a tripod, zoom out, or steady yourself.
2. Photos being taken without flash when flash should really be used will result in motion blur (which is slightly different than camera shake). This is due to the camera using a longer shutter speed to let more light in, with the side effect being that objects will move while the shutter is open, blurring the picture. The solution here is to use a flash, or take pictures in better light.
3. The camera may be focusing on something other than what you intended.
3. If you are taking photos in good light with a steady hand, and the camera is choosing the correct subject to focus on, then yes, the lens could need readjusted, though this is not a very likely scenario.
If the lens is "hunting" for focus, that could be a sign that something is amiss.
A local camera shop can verify the accuracy of focus for your lens.