Installing the GD library for Drupal on Ubuntu

This info is also here

Error: The GD library for PHP is missing or outdated

On Ubuntu php5-gd is not using bundled GD library.

Quoting this discussion

As you are probably aware, PHP has bundled an upgraded GD library for some time, which supports image rotation, convolution and alpha blending. The package php5-gd still uses Boutell's version of the library, which restricts the abilities of the PHP module.

It would be great if future versions of php5-gd can be built against PHP's GD library in order that the GD module can be used to its greatest extent.

Using bundled libraries is security hell. It will never happen in Debian. And I very much doubt that it will happen in Ubuntu.

However modified packages come from  http://www.dotdeb.org/ as they provide upgraded packages for LAMP stacks.

Open a command line interface and add following two lines to /etc/apt/sources.lst

deb http://packages.dotdeb.org stable all
deb-src http://packages.dotdeb.org stable all

Then run:

# apt-get update
# apt-get install php5-gd
# /etc/init.d/apache2 restart

It will complain about non-authenticated sources .. just ignore, it will also update some additional php libs , keep local modified php.ini