This one took me several days to resolve. The issue was that we migrated our magento website from the godaddy shared hosting account to the godaddy grid hosting and images were not appearing both on the backend and frontend system.

I searched high and low and there we many many suggestions that I could find on the internet. I even asked godaddy to see whether there was anything on the server that was causing the problem as I was certain that it was their problem especially when it was previously working on the old hosting account. In terms of configuration nothing was changed. They claimed that it was a configuration setting or a permissions problem. I almost gave up but I thought about this for a while and was determined to fix the problem.
My solution was to rename the .htaccess file to .htaccess.old or even delete this file that is located in /media/
I hope this fixes your problem as well.

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