You should turn on all your peripheral devices (printers, scanners, etc) and run the
Windows 7 Upgrade advisor to let it scan for potential upgrade issues.
If drivers are not available for your computer or it doesn't meet the system requirements then upgrading may be a bad idea. If drivers are not available for your printer, scanner, etc then you may have to buy new hardware to make it work w/ W7.
But if you do proceed then Check out this
upgrade info at Microsoft. Be advised it takes a custom install to go from XP to W7. This means you must back up all your data and settings (I recommend you download
Windows Easy Transfer for 32-bit WinXP and install it on your XP machine to assist with this). And you will have to reinstall all your programs after W7 is installed, so you will need the install programs (from DVD or if you downloaded them then maybe on USB flash drive).
Also something to consider, Windows 8 is due out in about a month and is supposed to be priced cheaper than W7 in most countries so at this point it may be worth waiting to either buy W8 or to buy W7 at sell-off prices.