Difference between upgradation and migration of Windows environment.

In-place upgrading
Windows Server 2003 and Windows Server 2003 R2 can both be upgraded in-place to Windows Server 2008, as long as you keep the following in mind:

• The Windows Server 2003 patchlevel should be at least Service Pack 1
• You can't upgrade across architectures (x86, x64 & Itanium)
• Standard Edition can be upgraded to both Standard and Enterprise Edition
• Enterprise Edition can be upgraded to Enterprise Edition only
• Datacenter Edition can be upgraded to Datacenter Edition only

This might be your preferred option when:

• Your Active Directory Domain Controllers can still last three to five years (economically and technically)
• You worked hard to get your Active Directory in the shape it's in.
• Your servers are in tip-top shape. 

Transitioning
Migrating this way means adding Windows Server 2008 Domain Controllers to your existing Active Directory environment. After successfully moving the Flexible Single Master Operations (FSMO) roles you can simply demote the previous Domain Controllers, remove them from the domain and throw them out of the window. Transitioning is possible for Active Directory environments which domain functional level is at least Windows 2000 Native.
 I feel transitioning is the middle road between the two other ways to migrate to Windows Server 2008:

• Restructuring means filling a new Active Directory from scratch
• In-place upgrading means you're stuck with the same hardware and limited to certain upgrade paths
• Transitioning means you get to keep your current Active Directory lay-out, contents, group policies and schema. Transitioning also means moving to new machines, which can be dimensioned to last another three to five years without trouble.

Transitioning is good when:

• You worked hard to get your Active Directory in the shape it's in.
• Your servers are faced with aging.
• In-place upgrading leaves you with an undesired outcome (for instance 32bit DC's)
• You need a chance to place your Active Directory files on different partitions/volumes.

When done right your colleagues might not even suspect a thing! The downside is you need to know exactly what you're doing, because things can go wrong pretty fast. that's why I wrote this useful piece of information. 
Restructuring
A third way to go from Windows Server 2003 Domain Controllers to Windows Server 2008 Domain Controllers is restructuring your Active Directory environment. This involves moving all your resources from one (Windows Server 2003) domain to a new and fresh (Windows Server 2008) domain. Tools like the Active Directory Migration Tool (ADMT) are priceless in these kind of migrations. 

Restructuring is good when:

• Your current Active Directory environment is a mess or is uncontrolable
• You want to build a new Active Directory environment and import (pieces of) your existing Active Directory environment.
• You need to merge (information from)(domains from) two Active Directory forests together
• You need to split (information from)(domains from) two Active Directory forests