The WordPress Automatic Upgrade Plugin, created by Keith Dsouza of Techie Buzz, is one of the best WordPress plugins ever written. It makes upgrading WordPress quick and super easy, letting you know exactly it what is doing each step of the way.
It it does a backup of both your files and database, grabs the latest version of WordPress, disables and then re-enables your plugins and even puts your blog into maintenance mode during the upgrade.
Of course there is always the chance that the upgrade will fail, so if that happens you’ll need to follow the WordPress upgrade instructions to do a manual upgrade.
Here’s more information on the latest version of WordPress.
Big thanks to Chris Messina for turning me on to this plugin.