Well you have two choices:
1: Buy Windows 7 Retail
2: Buy Windows 7 Upgrade
Retail: You can install on any computer and change whenever you like [though it can only be used on one computer at a time!]
Upgrade: Slightly cheaper than Retail. However, it uses the same license as the OS you are upgrading from. So, in the highly likely case that your Vista install came with the laptop, your Windows 7 Upgrade will also become OEM - meaning you can't legally install it anywhere else in future.
My recommendation would be Retails.
Next point, why Ultimate? I am willing to bet you wont even know what the Ultimate features are, let alone have any need for them. I would honestly save some money and opt for Pro or even Home Premium.
To actually install Windows 7 is super easy. Backup any personal documents and data to another computer, partition/drive or external HDD. Pop in the Windows 7 installation DVD and follow the prompts. It will nuke your Vista install and install 7.
If you want you can also get rid of the extra partitions Dell created on the screen where you choose where to install Windows.
