A thumbnail preview image should be 206 pixels in width and 150 pixels high. Recommended file format is png.
You can take a screen shot of your site/template using the key "Prnt Scrn" on Windows or the corresponding on Mac/Linux. (There are also many programs specialized in screen shots that can be used.) After making the screen shot, paste or open the picture in an image editor such as PhotoShop or Gimp and resize and crop your image to 206x150 pixles.