If you have skipped Windows Vista and are now planning to upgrade from Windows XP to Windows 7, then this read may help you. The upgrade option of upgrading from Windows XP to Windows 7, is not available in Windows 7 Setup when installing Windows 7 on a computer running Windows XP. However, you can use Windows Easy Transfer to migrate files and settings from Windows XP to Windows 7 on the same computer.
Upgrade from Windows XP to Windows 7
To do this, you must first copy files to a removable media, such as an external hard drive or UFD, or to a network share, using Windows Easy Transfer.
Next, install Windows 7 and then migrate your files back from the removable media onto your computer.
When you are finished, you must install your software programs again, but your files and settings will have been copied from Windows XP.
Detailed read on this at Technet.
Windows Easy Transfer enables you to automatically copy your files, photos, music, e-mail, settings, and more to your new Windows 7. This makes it much easier to setup your new computer with all your personal data and settings.
This software provides support for transferring data with Easy Transfer Cables or across a network, external drive, or CD/DVD.
To transfer files and settings to a Windows 7 PC refer to the instructions available at Microsoft. Download Windows Easy Transfer for your Windows XP-based PC.