No, it isn't an upgrade, its a new install. Its comparable from going
to windows 95 to Windows XP. You cant "upgrade", the changes are too
major.
You need to backup all your user data, and after installation any
programs you installed you need to install manually again. In
Principle Synaptics offers an option to save its configuration (which
programs are installed) in a small textfile, so you can restore them
automatically, but because there are many new elements in gOS 3 you
would remove when you do that, it's use isn't safe.
In theory you can install gOS 3 next to gOS 1 on its own partition,
then copy files from gOS 1 to gOS 3, but you need to know how to use a
partitioner to later get rid of gOS 1.
The good news is that gOS 3 will have a working upgrader, so (within
reason) you will be able to upgrade to later versions, and will
receive safety updates etc.