It's a script for uploading more files onto the server.
The code looked familiar to me, so I Googled one of the strings in it: it's a modified version of the sample PHP file upload code from this page. Unlike the sample code, however, the modified version sets the
$uploaddir variable to the same directory it's run from, so anyone using it can upload more files to the same directory (and even overwrite the script with something else, if they want).
Curiously, the script doesn't seem to allow uploading files to any other directories than the one it's placed in. Still, if an attacker manages to upload this script to your site and execute it, that means they'll presumably be able to run any other scripts they upload using it too.
As for whether (and how much) you should be concerned, that depends on whether the attacker actually managed to run the script. The mere fact that it was uploaded doesn't necessarily mean the attack was successful, if file permissions or webserver configuration stopped the server from executing it as PHP code. Still, the presence of the script on your server does at least mean that somebody tried to hack into it.