It is always recommended to read the release notes of the new release before updating, to make sure if the update can break some of the current features.
The release notes of Drupal 7.20 mentions:
The security fixes in this release change all image derivative URLs generated by Drupal to append a token as a query string. (As an example, links that previously pointed to a URL like http://example.com/sites/default/files/styles/thumbnail/public/field/image/example.png will now point to a URL like http://example.com/sites/default/files/styles/thumbnail/public/field/image/example.png?itok=zD_VaCaD.)
You can add the following line to your settings.php to get the site working:
$conf['image_allow_insecure_derivatives'] = TRUE;
but it would be as good as updating the core and not using the updates ;-)
Some useful links from the page:
- #1923336: Insert module doesn't work with Drupal 7.20 - contains a working patch to solve this problem.
- #1923554: New anti-DoS measure breaks for some file URIs.
- #1923936: Responsive images and styles module doesn't work with Drupal 7.20