When that happened to me on a Craftsman walk behind many years ago it had broken a rod and punched a hole in the cylinder.
Clean the oil off and look for a crack or hole.

Well that depends? when you changed the filter before did you see any sparkly stuff in the oil filter or in the catch pan when you drained it and did you put the right amount of oil back in it?

I would also take the oil filter back off and see if the seal failed or the filter and of course you can see behind it once the filter is off for hole in the block as suggested.

Sears Craftsman don't make em. Might want to say what brand/model number of engine? I suspect it's low end briggs or maybe K. Courage?

Only beings it two years old something went wrong? Usually they will last longer than that if owners do nothing, but put gas in it and on rare occasions check the oil level. That's why the two year warranty IMO of course. Grim!!!

Doesn't sound good-
On another forum that I can't mention without getting banned, there was an incident where the wrong filter was sold to the user.
A filter for a Kawasaki engine was supplied for a Briggs engine.
The gasket diameters are such that the Kawasaki filter gasket blocked the holes on the Briggs engine.
After some hassle, the user got a replacement engine from the auto parts store.

Briggs-
3/4" X 16 threads
Gasket 2.734" OD X 2.430" ID.

Kawasaki
3/4" X 16 threads
Gasket 2.475" OD 2.173" ID.

What Bill said was my first thought too - wrong or faulty filter. Sometimes in vehicles, the old gasket sticks to the engine and when the new filter is installed over it, a catastrophic leak ensues. Don't know if this is possible with a tractor engine but the first place to look is the filter. It is possible that the correct filter properly installed could fix it, along with a new air filter (if it has a paper filter) or cleaning of a foam filter. Oil probably got to the filter, carburetor and muffler, along with the cylinder(s). If that's the case, the oil will have locked up the engine, being incompressible. Then you have to remove the spark plug(s) and spin the engine to blow it out. Once started, the engine will smoke heavily until the oil is burned out of it along with the carburetor and muffler. If all this goes well, the last thing would be a good cleaning of the whole affected area with a spray engine cleaner and hose it off. That's the best case - the other cases probably involve engine replacement.
A hydraulically-locked engine will bend a connecting rod right away or send part of one through the block. Here's hoping its just a filter problem with no internal damage.

Thank you all for responding. I've been off the web since posting the message so just got your answers now. I will check out everything you suggested but I can say that when I changed the oil the old oil didn't appear abnormal (metal filing or anything) and the new filter appeared identical to the original filter in every respect, size, gasket, threads, etc. Once I get into it I'll return here to report the results. Thanks again for your advice, if it's the engine that failed I hope that Sears will compensate me on a new mower purchase, if they don't I will look elsewhere for a new one. 2 years = $1200 is not worth it!!!

OK, after taking off the oil filter I could still not find the source of the leak (mower still gives just 1 "ugh" when turning the key, nothing more, sounds locked up). The filter itself was intact with no sealing problem and gasket is fine. But I did find a piece of metal (brushed aluminum) that was laying on the engine housing support just below the filter. This piece is about the size of a fingernail but I could not find where it broke off from. It's the same metal material that makes up the motor housing so I do think it's shot with perhaps a busted rod? I'll be going to Sears tomorrow with the chunk of metal and explain to them what happened, will see what "options" they offer me, if any. If they say "tough luck" I'll be looking for a new tractor elsewhere.

Final wrap-up....
Sears treated me right with a really good replacement offer, much better than expected. The problem was definitely a engine defect with busted rod so that mystery is solved and case closed. Thanks again for all your advice!!!