Nothing to be afraid of. It won't really change much on your phone except make it smoother and has some more polish to the whole experience. The only thing it to make sure your contacts are Google contacts and are properly backed up to your gmail account.

If you do end up having issues after the update, a factory reset has been helpful to many here, including me. That will wipe everything on the phone, but soon your contacts will sync back over and your apps will be will be listed in the Downloads part of the market for you to reinstall.