When it comes to uploading avatar images some bases worth covering are:
1) Be sure your image one of these file types – jpg, jpeg, png, gif (Note that bmp’s cannot be uploaded due to size).
2) Do not use anything in the file name but letters and numbers. Use no spaces, no dashes, no underscores, or any type of special character or punctuation, except for the dot between the file name and the extension. Also make sure that the file name has an extension.
3) Choose an image that does not have any transparency in it.
4) Do not choose an animated gif image for use as an avatar.
5) Pre-size the image to be 128 pixels x 128 pixels square prior to trying to upload it.
It’s also important to know that at this time avatars do not display on posts, regardless of what’s aid on the Your Profile page. Avatars only display on posts on WordPress.com tag pages, on support forum posts, on comments left on WordPress.com blogs (including your own), and provided that you are logged into WordPress when making the comments.
Lastly take note that there is a display time delay when you upload an avatar. Avatars appear first on the tag pages and in the support forums and then hours later they appear on comments.
Reference: What is an avatar?