I did not find it so straightforward to setup bluetooth in my ubuntu 12.04 system. So I had to look up couple of sites to fix my problem and successfully transfer data via bluetooth.
The following link gives a nice, detailed, step-by-step instruction on how to turn on bluetooth in ubuntu.
However, I was not able to activate any button. They all appeared deactivated to me. If you are facing the same problem, then you have to do the following setup in terminal:
$sudo hciconfig hci0 reset
This activates the buttons and lets you do your setting. (Refer: http://askubuntu.com/questions/153384/trouble-turning-on-bluetooth-in-12-04)
We need to check the option "Receive files in Downloads Folder over Bluetooth" in the menu opened in Personal File Sharing. In ubuntu 12.04, it is found in the path:
Applications ->System Tools->Preferences->Personal File Sharing.
The files transferred to the system are stored in the folder "Public" in the homepath.