http://jsfiddle.net/Tarnum/rya6X/7/ (I slightly modified function uploadFile )
Back-end on PHP
<?php
if(isset($_FILES['file'])) {
echo $_FILES['file']['name'];
}
?>
http://www.php.net/manual/en/features.file-upload.post-method.php
It should work.
If not - try to send the form in the usual way without JavaScript and AJAX. For example, copy the <form> code from http://jsfiddle.net/, fix attribute "action", select the file and click on the submit button.
For the server, this will be exactly the same as the HTTP request using AJAX.
If the problem continues - then the problem is somewhere on the server side. Maybe in the server configuration disabled the ability to upload files.