If it is a true "upgrade" then the purpose is to change your os from Win98 to WinXP while still maintaining your installations and user data/settings.
While this is the purpose and is possible, it is often full of problems once the new os is up and running. This is mainly because of the vast difference in architecture between the 98 and XP environment that the installed software and hardware are trying to run in.
The recommended (by most users, not necessarily Microsoft) way to do this is to save your files, gather up any installation packages you don't want to have to download again, write down all license codes for the installed software, download all XP updates for your hardware drivers and 3rd-party software, etc., and save all of it to a CD or DVD. Back up everything and then wipe the hard disk clean and start over. The upgrade version of XP will tell you it didn't detect a previous version of Windows and will ask for your Windows 98 disk. When you put it in the drive and XP verifies that you have it and qualify for the upgrade version it will proceed to install a fresh new Windows os which will work a lot better than the upgraded Win98 will.
Josh
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