This tutorial should show you how to carry out an upgrade install of Windows 7 and will allow you to keep personal files.
Upgrade Install with Windows 7
An upgrade disc will look for a previous installation of Windows and will do what it says i.e. upgrade the operating system to Windows 7.
A regular retail disc needs no qualifying software and allows you to carry out a clean install of Windows 7, but it means you lose anthing you haven't backed and re-installing all your applications.