Check out your site settings, and if the gdlib php module is installed on the server.
Quoting the FAQ:
"If you don't see anything on your user profile pages to let you upload s then it's usually because GD is not enabled on your server. GD is a library that allows image processing.
- Make sure GD has been included in your PHP installation. You can check this by going into the Admin -> Configuration -> Variables page and looking for the gdversion setting.
This setting is chosen automatically every time you visit that page. If it shows GD version 1 or version 2 then everything should be fine. Save that configuration page and go back to your user profile.
Moodle thinks GD is not installed, then you will need to install it. On
Windows this is usually a matter of "turning on" the module in PHP (see
the installation instructions for help). On Unix you may need to re-compile PHP with arguments something like this (note the ones in bold):
./configure --with-apxs=/usr/local/apache/bin/apxs --with-xml --with-gd --with-jpeg-dir=/usr/local --with-png-dir=/usr --with-ttf --enable-gd-native-ttf --enable-magic-quotes --with-mysql --enable-sockets --enable-track-vars --enable-versioning --with-zlib
- Remember to re-visit the Moodle configuration page after making any changes to PHP so it can pick up the correct version of GD."