Hey mshair86,
Here is a little more detail - hope it helps.
Take care,
Ian
What are exactly the files that I should back up? and How?
You should back up your entire website directory (e.g. c:\inetpub\wwwroot\MyWebsite). Also backup your full database. You can do this through SQL Server Management Studio or check with your web host.
Should I extract all the files of the upgrading package in the same folder that contains my DotNetNuke files? and what should I use to copy these files? FTP manager?
Yes, you'll want to copy the contents of the upgrade package straight over the root of the DotNetNuke folder (e.g. c:\inetpub\wwwroot\MyWebsite). FTP will work just fine.
"Ensure file system permissions are intact" How can I do this ?
You'll want to right click on the root folder, select "security" and give either the Network Service (Vista, Server 2003/2008) or ASP.NET Machine Account (XP) "modify" permissions. If you're doing this remotely you'll want to check with your hosting provider on how to apply these permissions. Tell them that whatever windows account that is set as the identity of your web site needs to have "Modify" permissions.
the "Hit upgrade wizard" what and where is this ?
This would be your website in a web browser - e.g. http://localhost/MyWebSite - this will launch the upgrade wizard the first time you hit the site.