The only way to upgrade in your particular situation, is to do a Clean Install of Win 7. So you will need to back-up anything important to an external hard drive or other media, then run the Install for Win 7.
It should be fairly simple to back up your data files to a DVD (don't forget your email files - if Outlook, find your .pst files and reimport them when you reinstall). However, I think I'm right in saying, you're going to have to reinstall all your programs. And: make sure you know what drivers you need, and store them in a safe place. You might also want to run whatever the Vista equivalent is of the XP Files & Settings Transfer Wizard. (And if you don't, make sure you export all your Favorites and Cookies to somewhere safe too so you can reimport them).
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