To see "initialSpeed", in "transform.TransformDirection(0,0,initialSpeed)",

change to "transform.TransformDirection(0,initialSpeed,0)"

Because "transform.TransformDirection(x,y,z)"

var projectile : Rigidbody;
var initialSpeed = 20.0;
var reloadTime = 0.5;
var ammoCount = 20;
private var lastShot = -10.0;

function Fire ()
{ 
    // Did the time exceed the reload time?
    if (Time.time > reloadTime + lastShot && ammoCount > 0)
    {
       // create a new projectile, use the same position and rotation as the Launcher. 
       var instantiatedProjectile : Rigidbody = Instantiate (projectile, transform.position, transform.rotation);

           // Give it an initial forward velocity. The direction is along the z-axis of the missile launcher's transform.
         instantiatedProjectile.velocity = transform.TransformDirection(Vector3 (0, initialSpeed,0));

         // Ignore collisions between the missile and the character controller
           Physics.IgnoreCollision(instantiatedProjectile.collider, transform.root.collider);

           lastShot = Time.time;
       ammoCount--;
    }
}