Depends on where you download it from. I would think MOST places will simply have you download a disc image in the form of an ISO. Which you are then required to burn to disc in order to make use of it.
But, it is theoretically possible that it will do an in-place upgrade in a manner similar to Windows Update. In which case, you'll have to find out from whomever you're downloading it from.
I'm planning to upgrade from vista premium to W7 by downloading the thing online. If I do that will I get the option of burning a copy onto a disk, say, if i need to re-install in the future? I need a physical disk for future use just in case.