QUOTE from SBWALKER:
Install - contains just the run-time resources. Includes a web.config file. You should not use this version to upgrade an existing install unless you are very careful - because if you overwrite your previous web.config, you may lose access to your site membership. Includes Install versions of all Modules.

Upgrade - contains just the run-time resources. Includes a release.config and development.config. You can safely use this version for upgrading your site. However there is not automated utility for merging changes in the configuration files. Since there are nodes in the release.config and development.config which are new / required for DNN to function correctly, you will need to manually merge the applicable sections. This not a new step - it has been a requirement for any DNN upgrade all way back to version 1.0.0. Does not include any Module packages. The reasoning is that users do not always want to upgrade their modules when they upgrade the core.

In general, the standard method for dealing with config upgrades is to rename your existing web.config to web.config.backup. Rename the release.config to web.config. Then manually copy the following settings from the old web.config.backup to the new web.config file:

    <add key="SiteSqlServer" value="{connection string}"/>
    <add key="MachineValidationKey" value="{your localized key}" />
    <add key="MachineDecryptionKey" value="{your localized key}" />

you may also want to move your objectQualifier specification ( if you have one in your old web.config.backup )

    <data defaultProvider="SqlDataProvider">
      <providers>
        <clear />
        <add name="SqlDataProvider" type="DotNetNuke.Data.SqlDataProvider, DotNetNuke.SqlDataProvider" connectionStringName="SiteSqlServer" upgradeConnectionString="" providerPath="~\Providers\DataProviders\SqlDataProvider\" objectQualifier="" databaseOwner="dbo" />
      </providers>
    </data