Within the /system/expressionengine/third_party/ directory, copy the comment_uploads folder into your sites ./system/expressionengine/third_party/ directory.
Go to the Extensions area in the ExpressionEngine control panel, find Comment Uploads in the list, and click Enable.
Setup and configuring:
Enabling this extension will automatically create a new File Upload Preference in the ExpressionEngine CP, and a new folder named comments in your ./images/uploads/ directory.
Make sure the permissions of this folder are set to writable, typically 777 on Unix servers.
There is no CP-based configuration for this extension, aside from the EE File Upload Preference - you can edit that as necessary. The rest of the functionality lies with the template tags.
Within your sites ./system/expressionengine/third_party/ directory, delete the comment_uploads folder and upload the new one from the /system/expressionengine/third_party/ directory in your download package.
The extension will update automatically, and requires no further action from you.