Most likely the PHP server has a configuration setting that is causing the image upload to fail. Usually it is the memory limit.
try adding the following at line 1 of the Products insert page:
<?php ini_set('memory_limit', '256M'); ?>
to increase the availabel.
If the images you are selecting have a large file size, there may be other settings causing issues. See the following page for PHP server settings that will have an effect on large file upload: