Use wp_upload_dir() correctly

It seems that you’re either calling wp_upload_dir too early, when it has not yet been included in the scope (which is nearly impossible), or calling it without WordPress being even loaded (highly probable).

If you’re using some sort of iframe to provide uploadify.php directly then WordPress will not be available for it. Include wp-load.php to load up a WordPress environment before actually trying to use wp_upload_dir. Alternatively, and much better, include uploadify.php into the WordPress scope instead in your template or hook, whatever you are using to position to the upload form correctly.

Better yet, just use the code inside from the basic demo inside your template file directly without the need for a separate uploadify.php.