whenever you stick the windows 7 disc in it will give you 2 options.

1. To do a clean install.

or

2. Upgrade your os (some name like that)

now clean install speaks for itself. it erases everything and installs a fresh copy of windows.

and upgrading your OS takes all the files from windows vista, puts them in a folder named "windows.old" (I think, dont quote me on that) and installs windows 7.

also its always good to back up your files before you select option 2.