>>There're more than one edition of Windows 7 - http://en.wikipedia.org/wiki/Windows_7_editions.
>>Windows 7 installation will wipe out your WinXP. There's no in-place upgrade.
>
>The CD I have is Windows 7 Ultimate. Should I just put it on the drive and install?

If you don't care about existing WinXP installation, go ahead. Windows 7 will replace WinXP, not upgrade it. You'll lose all the settings and data.