PHP upload error: failed to open stream: Permission denied

The error appears when you upload file to folder which permissions don't allow you to upload files there.
To fix that, just change folder permission to 0777. Most of time folders permissions value is 0755 or whatever else.
0777 means everybody - owner, group and public can read, write and execute from this folder, using files from the hosting.
To change folder permission, i usually use firefox plugin - "FireFTP".

FireFTP plugin
http://fireftp.mozdev.org/
http://fireftp.mozdev.org/