Why would you choose to do an in-place upgrade of SharePoint?
- The hardware currently hosting your SharePoint 2007 installation meets all of the requirements for 2010. Generally, if you are migrating your SharePoint farm to new hardware during the process, you would want to setup a new farm and use the database attach approach.
- You want to preserve all of your farm-wide settings. Setting up a new farm and using the database attach approach requires that you redo your farm-wide settings. An in-place upgrade preserves those settings.
- You don't mind the extra downtime. An in-place upgrade requires that your SharePoint farm be offline for the duration of the upgrade. Depending on the size and complexity of your SharePoint 2007 installation, this could be several hours.
- Run Setup on all servers in the farm. It is important to start with the server that will be hosting Central Administration. Make sure not to run the configuration wizard on any servers until setup has been run on all servers.
- Run the configuration wizard for all servers in the farm, starting with the server that will be hosting Central Administration. There will be a page telling you to pause and run the wizard on the other servers. You will need to pause at each server when you get to that page until all server are at the same point.
Visual Upgrade allows you to upgrade the look and feel of SharePoint 2010 Site Collections separately from the actual in-place upgrade process. When you have completed the upgrade process, the site will be upgraded to SharePoint 2010, but it will still have the look and feel of SharePoint 2007. The Visual Upgrade tool allows you to preview each Site Collection in the SharePoint 2010 look and feel before it is upgraded.
Microsoft has some great poster-sized diagrams that outline the upgrade process. Look for them here: http://technet.microsoft.com/en-gb/library/cc263199(office.14).aspx