Error message when uploading an image
You're going to see this error when you try to upload an image file that PHP has an issue with, either because it is larger than the allowed maximum file size in PHP or because trying to process the image (ex. for creating thumbnails) is consuming more memory than you have allowed in your php.ini. 

There is a monster thread on this topic over at Drupal.org but the key takeaways are to try and increase these two values (php file upload or memory limit) or to switch your imageapi library from PHP GD over to ImageMagick to avoid the memory constraints.