I don't believe AJAX can handle file uploads but this can be achieved with libraries that leverage flash. Another advantage of the flash implementation is the ability to do multiple files at once (like gmail).
SWFUpload is a good start : http://www.swfupload.org/documentation
jQuery and some of the other libraries have plugins that leverage SWFUpload. On my last project we used SWFUpload and Java without a problem.
Also helpful and worth looking into is Apache's FileUpload : http://commons.apache.org/fileupload/index.html