GD_Support Information from the php user manual

XLI. Image functions
You can use the image functions in PHP to get the size of JPEG, GIF, PNG, SWF, TIFF and JPEG2000 images, and if you have the GD library (available at http://www.boutell.com/gd/) you will also be able to create and manipulate images.

If you have PHP compiled with --enable-exif you are able to work with information stored in headers of JPEG and TIFF images. These functions do not require GD library.

The format of images you are able to manipulate depend on the version of gd you install, and any other libraries gd might need to access those image formats. Versions of gd older than gd-1.6 support gif format images, and do not support png, where versions greater than gd-1.6 support png, not gif.

In order to read and write images in jpeg format, you will need to obtain and install jpeg-6b (available at ftp://ftp.uu.net/graphics/jpeg/), and then recompile gd to make use of jpeg-6b. You will also have to compile PHP with --with-jpeg-dir=/path/to/jpeg-6b.

Check if you have gd_support by looking at your server information in admin-reports-server_info: