User Avatar upload fail

I've checked the forums, but haven't found anyone with my problem yet ... my avatar upload seems to be successful (loads 100%) but then the page refreshes with the following:

Upload Failed! Error was: Unable to create directory /var/www/vhosts/ Is its parent directory writable by the server?

What to do? (and assuming the problem does lie with the file permissions - which file should be altered and to what permissions?)