You can find the code for this level here.
This level is a whole social network!
Okay, it's not, it's just a page with a profile picture. But on the bottom of the page, you can see something interesting: "Password for Level 3 (accessible only to members of the club)". Of course, if you click on it it doesn't work. Let's see how we can access this file.
The key here is that you can upload your picture so that it's displayed on your profile page.
But if you look at the code, you can see that no check is performed on the file you upload. Which means you can upload any file, not just a picture.
You also know where your "picture" is stored: uploads/your_file. So we can upload a PHP script that'll open the password file, and visit the URL where it's located to execute it:
<?php $content = file_get_contents("../password.txt"): echo $content; ?>
Let's name this file exploit.php. We upload it:
We can see that no image is displayed (because your browser can't display the script as an image), yet the server says it was successfully uploaded. Now, we just have to go to upoads/exploit.php, and bam! you have the password for this level.