How do I upgrade from XP or Vista to Windows

An upgrade install means simply inserting the installation media for your new operating system - Windows 7 in this case - and running the installation program. It then notices whatever you have installed on your machine already, and upgrades it in place. All your compatible applications and data remain - you're just running them in the new operating system.
That all actually sounds pretty nifty in principal. Unfortunately, there are two problems:

"... even if you can perform an upgrade I typically advise against it ..."

• If you're running Windows XP, it's not supported. If you're "downgrading" the edition (i.e. from Vista Ultimate to Win7 Pro or Home), as our questioner is, it's also apparently not supported.
  
• If you can do it, history says the results aren't always as clean as the scenario might lead you to believe. Most major upgrades often leave behind minor, and occasionally major, problems and issues.
  

If you're in the first category, you have no choice, but even if you can perform an upgrade I typically advise against it because of the second. I also happen to view an operating system installation as a major operation that's a perfect time to "clean up" your system from any accumulated software rot.
In other words, whether you can upgrade or not, just perform a clean install anyway.
Like an upgrade, a clean install is very simple in concept, but unlike an upgrade it's more work.

• Backup - at a minimum, backup all your data. Ideally, though, just backup everything with an image backup from which you can restore individual files. In my experience, trying to identify what constitutes "your data" is almost always incomplete, and you frequently find that later there's something you really wanted that you didn't think to include. Backing up everything avoids that issue.
  
• Install Windows - when you install the operating system make certain to chose a new installation, overwriting the old. If given the option, allow it to format the installation partition to erase everything there on. (A quick format is sufficient.)
  
• Reinstall Applications - using their original installation media, or their saved downloads, install the applications that you use. I tend to install a few primary applications that I use all the time right away, and then install others over time as I need them.
  
• Restore Data - copy back any and all data that you need from your backup: your documents, pictures, what-have-you.