This means that the file permissions on your upload folder are not set to allow you to write the new files to it.
Have a look at Changing File Permissions, and it should (hopefully) explain a little bit more to you.
What is the size of the image? Hope it doesn’t exceed the maximum upload limit of WordPress?
Try changing the permissions on the wp-content directory to 766. If you still have problems, try 767, 775 or 777. Once your uploads are working, change the permissions on wp-content back to 755 again and check that everything still works OK.
http://codex.wordpress.org/Changing_File_Permissions
Hey I know this is a year old post, but I just had the same thing happen. I checked the permissions on the upload folder(s) and they’re all 777. I’m still getting this error.
