Here’s the 3 ways to do it:
https://www.apple.com/macosx/upgrade/
Version #3 is what you’re asking about. #2 is close but not quite the same. Whichever you pick you should back up all of your information, just to be safe. If you go for #3, back your info up, upgrade, and then put your data back where it belongs.
I have heard (but never tried) that you can copy your system drive to an external firewire drive, then use option #3 to upgrade, and then finally use the setup assistant on the new system and tell it that the firewire drive is your “old” computer. It will bring all of your data over because it thinks the drive is your old computer you’re upgrading from.
I plan on trying that way but only AFTER I burn my files to DVD as well as the firewire drive. That way, if the setup assistant plan doesn’t work out, I can still get my data off of the DVDs.