This is the simplest way I found to allow for contributors to upload media on your WordPress blog:
Add this to the functions.php file in your current theme:
if ( current_user_can('contributor') && !current_user_can('upload_files') )
add_action('admin_init', 'allow_contributor_uploads');
function allow_contributor_uploads() {
$contributor = get_role('contributor');
$contributor->add_cap('upload_files');
}
source: http://wordpress.org/support/topic/allow-contributor-to-upload-media