That error is quite general and could have a number of causes:
1. Check that the ASP.Net worker process account (usually NETWORK SERVICE but may be different depending on your server OS version) has been given full permission on the root of the installation and on all child folders.
2. In Admin-->File Manager, check that the role belonging to the user uploading the image has been granted both Read and Write permissions on the folder to which they are to upload.
3. When logged in as host user, confirm that in the Site Settings, the filename extension of the the file to be uploaded (such as jpg, png, gif) appears in the list of allowable file extensions.
4. Does a file of the same name already exist in the target upload folder?
5. Is there sufficient disk space available for the file to be uploaded?
If the above does not solve the problem, what version of DotNetNuke do you have installed and what module (and its version) or administrative function are you using to upload the image file?