File system path
By default, this is set to "files". We recommend leaving this setting alone.
By default this is set to "/tmp" which is the temporary directory common in GNU/Linux distributions. If you are using a Windows or other kind of server, we recommend setting it to "tmp" (no slash). Drupal will automatically create the temporary directory as a subdirectoy of the "File system path."
If it does not due to permissions or other configuration issue's, you can create the file manually.