If you plan to upgrade from 3.x to 4.x I would recommend starting as fresh as possible.  Below is a quick summary of the steps:

1. Logon to your DNN 3.x site as "Host" and go to "Host" > "Portals".  There is a rather nifty tool here that will allow you to export your site settings and data (make sure the data checkbox is checked). This will create two files, NameYouGave.template and NameYouGave.template.resources.
2. Begin to setup your new DNN 4.x website, but prior to running or creating your site copy the two files from step (1) located in your DNN 3.x portals\_default folder to the DNN 4.x portals\_default folder.
3. Rename the existing files, DotNetNuke.template and DotNetNuke.template.resources, to DotNetNuke.bak.template and DotNetNuke.bak.template.resources and rename the files you created and copied to the DNN 4.x Portals\_default to DotNetNuke.template and DotNetNuke.template.resources. *(refer to the alternative way below to achieve the same result).
   
4. Run the solution or create your Portal as you normally would and you will have a new DNN 4.x website with your DNN 3.x stuff (Note: If you have custom modules, skins, etc. you will need to install these again.)

This will NOT port your user's information over.  I would recommend using a tool like BulkUser Import&Export that you can get at a reasonable price from snowcovered.com. 

*There is an alternative way to do Step (3) as well.  Instead of renaming the DotNetNuke template and resources files, create your site as normal using the DotNetNuke template provided, and add your skins and modules.  Then add a Parent Portal and select your resources files you created and copy them to Portals\_default, making them available from the template dropdown.  When you create your portal select your template and your parent portal website will be created with the same skin, data, etc.  You may need to go through some of your pages, i.e. pages with HTML Modules and change the portal from say "3" to "1".  This all depends on the portal number assigned in DNN 3.  This will ensure your URLs etc. point to the proper location of images and other resources.

If you would like to do this for a multi-portal site and are working locally, i.e. using a backup of your database and website from your web hosting company, you can do this as well by performing one additonal step.  You will need to access your database and open the PortalAlias table and set the portal alias name to the virtual website you setup locally, i.e. localhost/dotnetnuke then export your site with data, then change your next portal alias record in your database this URL (blank or change the previous so thiis alias is effective for only one site at a time) to  ocalhost/dotnetnuke, etc.  The assumption here is that you are making changes locally prior to FTP'ing your site to your hosting company.  The method here that I used let me use the same virtual website, rather than creating one for each parent portal.  You can create as many virtual websites on your local machine as you have portals, and is simply a preference.  In either case, make sure the portal you would like to export is mapped properly to your local website of choice by changing the PortalAlias record in your database for each portal.