For some reason the Thumbnail creation has switched off.
Googling the issue reveals that I can just switch it back on in Parameters - but I simply cant find a link to parameters anywhere.
Can anyone point me in the right direction?
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You should try contacting the developers themselves.
Try 'Components - Phoca Gallery - Control Panel - click on icon Options (Parameters) (you can find this icon in top right corner of your Joomla administration)'
Under Main > Pagination Thumbnail Generation - (Yes | No) Thumbnails will be generated only from images which will be listed in the Gallery list (more information about this parameter in Phoca Gallery User Manual)
Hope this helps.