It depends on the modules, you are using, whether you'll be able to upgrade your site to latest version of DNN.
Updating from versions before DNN 4.6.0 are a bit tricky, you'll need to merge changes manually into your web.config, I described it at
http://www.deutschnetnuke.de/AboutDot...hren.aspx, upgrade packages up to DNN 8.0.3 are available for download from DotNetNuke.codeplex.com.
You should follow the suggested upgrade path, provided in wiki.dnnsoftware.com. after each step, uninstall all modules you don't need.
To backup your site, you need to backup all files and the database. if the database is an attached one, you should use backup option of SQL Server (right click database node in SQL Server Management Studio and select "backup" and on the target machine "restore". For the files use zip.
After restore, you'll need to modify both connection strings in your web.config file and you might need to add a value to portalalias table in the database.