It depends on your computer hardware and the service pack you have installed with Windows Vista. Try running Windows 7 Upgrade adviser (see link in 'Related links' further down the page.)
Yes, you can update by going to Microsoft's website. I highly recommend doing so. Windows 7 is much, much better than Windows Vista. You can update cheaper then buying Windows 7 full.
I believe if you right click on your My Computer Icon, on your desktop, then click on properties, somewhere close to the top it should say "Get more features with a New edition of Windows 7" the text...