Please read the information contained on this page carefully BEFORE you attempt your upgrade!
Download the v3 release zipfile from the DotNetNuke site (you must be registered and logged in to download files). This version includes the full source code, and is meant to be used on a development machine. You'll later deploy only the runtime files to your production web server.
Upgrade from prior version
The v3 release version supports upgrades from all previous production versions, including v1 and v2 DNN portals (excluding the v3 betas v3.0.4-v3.0.11). If your v1 or v2 portal used only standard modules, your upgrade path should be fairly painless - just be sure to backup your database and directories before attempting any upgrade! The best practice would be for you to stage your upgrade using a backup of your site on a test server.
The v3.1.0 version introduced a small, but significant change to the upgrade process. You can read a forum thread that goes into much detail on the what, the why, and complete with plenty of opinions from the community about how to "fix the problem".
The change is that the <appSettings> MachineKeys setting is now generated per machine on a clean install. These keys are used in the member provider to encrypt user login information - this provides a more secure method of encryption than the previous one where all users' MachineKeys were the same.
The new installation instructions are found in this distribution directory: \Documentation\Public, and the file is named DotnetNuke Installation Guide.doc. Please read these installation instructions carefully before beginning your portal upgrade.
I'll post more details here on the upgrade process as I get a chance.