The upgrading process will preserve all of your active settings and modules, but will overwrite hacks and any changes made to the default template (in the directory {phorum dir}/templates/default). Other templates will be kept intact.
Here are the steps for upgrading:
Now you can choose whether you want to upgrade from a webbrowser or from a console.
Open your forum using your webbrowser. In case a database upgrade is needed, you will be prompted to go to the admin page. In that case open the {phorum url}/admin.php page, which will guide you through the upgrade.
In the scripts directory of your Phorum installation, you will find the script "console_upgrade.php". Go to the scripts directory and execute the script from there. On most systems, you can do this using the following command:
shell> php console_upgrade.php
If you want to run this script from a different locations, then edit the script and update the $PHORUM_DIRECTORY variable to match the location of your Phorum installation.