I believe you are thinking of the OEM version that ships with new computers,
though I haven't tried one of those. Truth be known, MS has changed their
sales methods rather substantially and I haven't kept up on how they all
work.
A true, store-bought retail copy of Office 2007 (not OEM!) will install over
any version of Office from Office 2000 on. (I'm not sure about 97/98 or
earlier.) This is basic Microsoft policy. In fact, in the case of Office
2007, you have a choice of keeping the older version and running the two
versions side by side (noting the Outlook issue pointed out by JoAnn). I
just tested, so I can safely say that the *retail* version of Office 2007
behaves as expected.
Guess I should add there are several possible issues you may encounter when
upgrading from a trial version of Office 2007 to paid version. Here's a
rough collection of pertinent articles.
http://support.microsoft.com/search/default.aspx?catalog=LCID=1033&query=office+trial+2007&mode=r