Here’s a chart which provides at a glance view of which current version of Windows can be upgraded to which version of Windows 7. This chart was provided by Microsoft when asked by Walt Mossberg. Thanks Microsoft , thanks Walt !
Please note that, only the green box saying ‘In-place Upgrade’ will upgrade keeping all your files,settings, programs as it is been in the current Windows version.
While the blue box of ‘Custom Install’ (clean Install) gives you the option to either completely replace your current OS or install Windows 7 on specific drive or partition you select. You can also do a custom install if you do not have any OS or if you want to do a dual/multiboot on your system.
Windows Easy Transfer and Windows 7 Upgrade advisor are useful tools that can assist the upgrade. For more details about these tools, one can check http://windows.microsoft.com/upgrade
Users of Windows XP can also check this- Step-By-Step: How To "Upgrade" from Windows XP to Windows 7 by Scott Hanselman. Where Windows XP users can migrate using these steps to Windows 7.