That's the default avatar. More than likely you have upload approval enabled and need to approve their uploads. You can can enable or disable approval within CB > Configuration > Moderation. You can also adjust this per image field by editing the field within CB > Field Management and adjusting "Upload Approval" under Parameters > .Image Limits You can approve their uploads from the workflows module or image approval page (you will need to create a Joomla menu item to this). There is no upload button with the field. Select the image then click the Update button at the bottom of profile edit.

Folks, CB does not timebomb. It does not suddenly change behavior on you. Recall what you last changed or if your hosting environment was changed in any way.

As shown in my first picture, (sorry not "Upload" button), but "Update" button is not showing up after selecting image.

The update button doesn't hide to begin with. It's bottom left of profile edit. If it's not there you've something 3rd party hiding it.

The Moderation of image upload is not turned on:

Globally image approval is disabled, but could still be enabled per image field. Edit the "avatar" field within CB > Field Management then under Parameters > Image Limits ensure "Upload Approval" is set to "Disable". This will have no affect on currently pending approval images. This only affects new uploads. Existing pending approval images you will need to approve.