Automatic thumbnailing is allread built in, if you dont enter anything into that field.
This is of course only if you Have GD , Imagemagick , or Netpbm installed on the server. and your settings are configured correctly.
Try this, see if GD is installed
1) Go to admin control panel
2) click on settings
3) look for where it says Conversion tool for thumbnails
4) choose Gd Bibliothek
5) click Save changes button down at the bottom'
6) try uploading a image (jpg)