You can do three things:
1. You can perform an in-place upgrade from Vista to Windows 7. Windows will attempt to retain as many settings and the like that as it can but a lot can and often does go wrong. I do not recommend doing OS upgrades like this.
2. You can install Windows 7 on top of Windows Vista. The install process will backup most of the non-system files into a set of folders called "Windows.old" which will contain your old user profiles, programs, etc... If the data is on another hard disk it will not be affected. Everything will have to be reinstalled and stuff will have to be moved around but the old data will still be there.
3. You can do a complete and fresh reinstall. This process will completely destroy the existing filesystem and all data on the hard drive will be erased. Before you do this you should backup anything you wish to keep to another device.
#3 is the most preferable but #2 will work in a pinch. I highly advise against using #1