Microsoft released a nice, big chart the other day which details the many possible ways of moving from your existing Windows OS to Windows 7. It's got a slight case of information overload, however, so let's simplify things a bit. After all, not everyone reading Download Squad is an IT director with years of experience.

First, let's spell out the important terms.
In-Place Upgrade: means one you can run from your current Windows desktop. If f you currently own a laptop or desktop with Windows Vista Home Premium you will be able to boot up your computer as normal, pop in your Windows 7 Home Premium disk, and upgrade Windows. Your existing data (music, pictures, etc.) and programs are automatically moved.
Custom Install: "Custom" here really means "new," "fresh," or "clean." When you finish installing Windows your new desktop will be pretty bare - none of your old programs of data will be there, so you'll need to back them up first. Custom installs can't be performed from your existing Windows desktop. You have to force your system to boot from the Windows 7 DVD instead.
First, let's spell out the important terms.
In-Place Upgrade: means one you can run from your current Windows desktop. If f you currently own a laptop or desktop with Windows Vista Home Premium you will be able to boot up your computer as normal, pop in your Windows 7 Home Premium disk, and upgrade Windows. Your existing data (music, pictures, etc.) and programs are automatically moved.
Custom Install: "Custom" here really means "new," "fresh," or "clean." When you finish installing Windows your new desktop will be pretty bare - none of your old programs of data will be there, so you'll need to back them up first. Custom installs can't be performed from your existing Windows desktop. You have to force your system to boot from the Windows 7 DVD instead.
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