After updating Drupal to 7.4.4. I could still upload images, but they would not show up in the editor or on the generated page.
After an hour of searching for a solution, this worked for me:
1. Create a new directory in sites/default
2. chmod to 755
3. Copied all files from the "files" directory to the new directory
4. Changed the path in Configuratrion / media / path settings to the new directory