Microsoft Windows 7 Professional Upgrade is cheaper because you are installing it on a PC that already has XP. So it's an "upgrade" from XP rather than being installed on a new PC, but installation is the same either way. It will partition and format your drive and install the new OS. You'll then have to re-install all your software, and copy your data over from the backups.
Microsoft has a program available that you can run to list all the software currently installed on your PC. It's for upgrading to Win7. That provides you with a good list of what you'll need to have on hand to re-install your software after the upgrade. There's no easy path to upgrade from XP to Win7
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