I am running Windows XP on my desktop PC and I am considering installing Windows 7 on it as I think it is still decent enough for the work I do. If you are a Windows XP die-hard you already know that you cannot upgrade XP in-place with Windows 7.

One way to keep your current installation of Windows XP would be to first upgrade to Windows Vista and then upgrade to Windows 7. Of course if you, like me, never touched Vista you do not have a copy lying around.
To go buy a Vista Upgrade copy just to upgrade to Windows 7 is also kind of silly.
The only other way to at least keep your user profiles and settings is with a tool called Windows Easy Transfer for Windows 7 from Microsoft. The only thing you have to do is reinstall your apps.
Windows Easy Transfer was already available for Vista and got improved for Windows 7. The tool takes your user profiles and settings from your Windows XP and transfers it to your fresh Windows 7 install.
Reinstalling all your applications again is still some work, but at least you do not have to start entirely from scratch.
More details about the Windows Easy Transfer for Windows 7 can be found here. A step-by-step guide on using the tool can be found here.
If you have to upgrade several Windows XP machines you should look into the Microsoft User State Migration Tool 4.0. Do not forget to pre-order Windows 7 Upgrades now at the discounted price.

If you know a better way to upgrade Windows XP to Windows 7 please post it below in the comments.