This happens if the local configuration file is not writeable or owned by another user so that PHP is not allowed to access it. You have to use the "Safe Mode Hack" to allow file operations via FTP. To enable it, open system/config/localconfig.php and add the following lines:

$GLOBALS['TL_CONFIG']['useFTP'] = true;
$GLOBALS['TL_CONFIG']['ftpHost'] = '';  // FTP host
$GLOBALS['TL_CONFIG']['ftpPath'] = '';  // FTP path (e.g. html/)
$GLOBALS['TL_CONFIG']['ftpUser'] = '';  // FTP username
$GLOBALS['TL_CONFIG']['ftpPass'] = '';  // FTP password

Do not mess with file permissions! TYPOlight will not work correctly if you just make the local configuration file writeable. If there are any access restrictions, always use the Safe Mode Hack.