Steven Zahm@ Barbara
My best guess is that your web host has neither GD or ImageMagik installed. GD is nearly universally installed on web hosts so this error is exceedingly rare. It could also be, though unlikely, cause by a theme/plugin conflict.
I recommend checking the System Info on the Connections : Tools admin page. There is a section in the results which will tell you if the web host has GD installed or not. If you web host does not you’ll have to contact their support and request they install it. This does affect the core WP images too. Instead of being scaled and cropped as they should, WP will simply send the full image using the browser to scale down the image. This could cause your site to be unnecessarily slow as larger than necessary images are being downloaded by your visitors.
If you find the GD is installed, then you’ll need to do the conflict checks. Here are the links to the docs:
Hope this helps, let me know.