Yes, pretty much.
If you buy the upgrade version of Windows 7 and something terrible happens and you need to reinstall the whole system, you'll have to install Windows XP or Vista (ie. the one you're running at the moment) and then reinstall the upgrade.
All in all, a very laborious process indeed and not one I'd be happy about having to do. Plus, I've been reading a few horror stories about the upgrade path. A clean install of Windows 7 however seems to be relatively trouble free.
If you go down the upgrade route, I'd advise you to also buy a big external hard drive (I've just bought a 1 terabyte drive from Tesco for £65), download some free disc imaging software such as...
http://www.macrium.com/reflectfree.asp
... and backup your system after a sucessful upgrade. Then if the worst comes to the worst, at least you can recover your Windows 7 system relatively painlessly.