So I downloaded the game during the free promotion and any time I play the game last no more than 10-15 minutes before getting extremely laggy for a few seconds, then freezing all together. When I try to click on the window while it is frozen it turns white-ish as shown in the picture. Please help.

Hard to say, what's wrong. Please check, if there're any new drivers for your graphic card and chipset.

You can also try to bypass DirectX by using OpenGL for graphics processing.

Find the file settings.txt, it's in \Users\%USERNAME%\AppData\Roaming\runic games\torchlight

Open it with a text editor and change the entry

OPENGL :0

to

OPENGL :1

(Make a backup of settings.txt before you change anything.)