It depends on who you ask.
Unfortunately, there is not an industry wide consensus on the definition of "upgrade". Microsoft refers to "upgrade" as moving from a particular version of a program to a later version. (We are speaking of operating systems here) There are two general types of upgrades by Microsoft's definition: in-place upgrade and a clean-install upgrade. An in-place upgrade installs over your current OS without formatting and wiping out all your saved files and applications (unless something goes terribly wrong). Only certain OSs can perform an in-place upgrade to certain other OSs; Vista, for instance, can be upgraded to Windows 7 via in-place upgrade in most cases.
The other type of upgrade, by Microsoft's definition, is a clean-install upgrade. In this upgrade, you must format the hard drive completely wiping the previous OS and install the new one. Normally, you must save any files externally you wish to transfer and reinstall them manually to the new OS. This is the general procedure required to upgrade from Windows XP to Windows 7. (There are tricks that one can perform to modify this procedure somewhat, but these generally are beyond the ability of the typical user.)
NOW, in common vernacular within the computer community, a clean-install upgrade is described as "clean install", while an in-place upgrade is described as "upgrade".
So, while Microsoft would say, "Sure, you can upgrade from XP to Windows 7, but you must do a clean-install upgrade." Common usage would say, "NO you cannot upgrade from XP to Windows 7, you must do a clean-install." They are all saying the same thing, there is just some conflict in terminology.
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