iOS applications are not allowed to make use of the front facing camera unless the application is in the 'foreground'. This means Hidden for iOS will not be able to take a photo until the thief attempts to view or dismiss the fake alarm notification. For more on how Hidden for iOS works, please read this support article: http://hiddenapp.com/blog/2013/mar/11/hidden-for-iphone-and-ipad/
Please ensure you've installed the latest version of Hidden which can be downloaded from your Tracking Control Panel.
Uninstall or disable any third party camera software such as ManyCam.
Make sure there are no third party applications using the iSight camera such as Adobe Flash or Skype.
If all else fails, try repairing disk permissions before running another test: http://support.apple.com/kb/PH5821