We're probably going to need more information, so here are some questions and things to try.

How are you trying to access the PIL? Are you trying to use the google.appengine.api.images module, or PIL directly? It sounds like the former, but it's not clear.

Did you follow the App Engine instructions?

Post code, if you can.

Perhaps the most important thing to try: see if you can use PIL from a non-App Engine script. Just write a quick Python script that accesses it and see how that goes. Something like:

import Image
im = Image.open('filename.png')
im.show()

If that doesn't work, it's not surprising that Google App Engine wouldn't work with PIL.