Lion

[dnanian]

It's usually best to make a full backup, check it, eject it and put it aside. Install the new OS and see if it works for you. Don't attach the backup drive until you're sure you want to update it.

Then, if it's a minor update, I'd use Smart Update. For a full OS release, either Smart Update or Erase, then copy works, but if the OS has updated the file system significantly (as Leopard/Snow Leopard did), a full erase is often a better idea.