Click the "Upgrade My Library Link" from the QUICK LINKS section of iTunes
This link brings you to a screen that displays the Audio and Video tracks you have that are eligable for iTunes+ upgrades. Once you decide you want to upgrade, click the BUY link
Next you will get a confirmation dialog box asking if you want to purchase the upgrade (assuming you have not disabled this feature)
Apple then tells you that the files in your iTunes library will be replaced. The cool thing is Apple gives you two options: delete them, or move them to a folder on the desktop. I strongly recommend option #2!
Once they conversion is done, your files are replaced and iTunes tells you that you have nothing left eligible to be upgraded.
Afterwards, as songs become available for upgrade, they will automatically show in the QUICK LINKS section
I found the entire process of upgrading my library very easy. I am looking forward to the rest of my purchases to be eligible in the near future. Unlike some stories I have heard, it did not take long at up to upgrade, probably 5 minutes. iTunes simply exports the DRM content to your desktop and downloads DRM free content to replace it; simple!