These topics are showing up a bit more frequently these days. It sounds like your server has been compromised. You'll need to lock down the server as there is most likely a hole there. If you are on some sort of commodity hosting plan on a shared IP, I'd be considering a new home.
The possibility to upload files is probably due to an open FTP port and a dictionary attack on the login. That is just one method. If your on a shared hosting plan with thousands of others, there is the probability that many of the others are in the same position as you. :(
