The deployment scenarios are the following: upgrade (in-place), new installation, refresh, and replace.
This scenario allows an installation of Windows Vista Service Pack 1 (SP1) or later to be upgraded to Windows 7 while preserving the user state and all transferrable settings and files, as well as maintaining the installation of existing applications. As discussed in the previous chapter, there is no direct upgrade path for Windows XP, and therefore, the refresh method must be used (which keeps files and settings but not installed applications). This deployment method is also assessed by the Windows Compatibility Wizard, which helps determine if any components need to be individually addressed before performing the upgrade.
Performing an upgrade may be one of the easiest and least complex methods for deploying Windows 7; however, there is a certain risk attached to this operation as all settings are imported “as-is” from the earlier version and the administrator does not have much control on what gets transferred. Unless the state and condition of the system are known, it may be preferable to opt for a scenario that allows for selectively preserving the settings.
The new installation involves deploying a clean copy of Windows 7 on the target computer through a straightforward setup process. It is assumed that the hard drive and system volume have been properly partitioned and formatted. This type of installation will deliver the most consistent result because all settings are either the setup defaults or set by the administrator.
Similar to the new installation, the refresh scenario contemplates performing a clean setup with the difference being that the target computer already contains a Windows operating system for which files and settings will be preserved (note that as a difference with the upgrade method, the installed applications are not taken into consideration). This scenario is especially useful in the event that preserving the user state is a priority as it still leverages the benefits of consistency that come through a new installation. This scenario can be automated with the latest version of the User State Migration Tool (USMT 4.0), which will collect the pertinent data for each user state found in the system and consequently restore it after the clean installation is performed.
This is very similar to the refresh scenario except that the target system is a new computer, which does not contain any files or settings. The scenario consists of conducting a new installation on the target computer, and then using the USMT 4.0 to transfer files and settings from the old computer. This scenario can be run side-by-side with an older system running Windows XP or Windows Vista.
Source of Information : Syngress Microsoft Windows 7 Administrators Reference Jun 2010