So I just recently noticed after upgrading to WordPress 3.5.1 and updating my servers PHP install that it seemed the process of creating thumbnails had broken. I was trying to create a gallery and getting full size images filling my content boxes. Checking the uploads folder showed there was no thumbnail output at all. Now this could also be that I just upgraded my php, also switching over to a NTS version to use with Fast-cgi on IIS. It had been a little while before I noticed this was an issue making it hard to pinpoint what exactly changed that broke the thumbnails.
Wordpress relies on PHP’s GD extension to output images, as a result if this extension is not loaded you will get no thumbnails. Locate your PHP install, and check the ext folder for the php_gd2.dll. If it’s there, open up the PHP.ini file and make sure that the following line is uncommented:
If it is not, you can get a copy from php.net. After that your thumbnails should now be generating! One thing to note is that the thumbnails are generated when you upload them, so existing pictures will need re uploaded to get thumbnails for them.