No, there are three options; the third is "Archive and Install":
http://support.apple.com/kb/HT1545
...which is what most people recommend. (Or at least it's what I recommend and do myself.) It preserves your user settings and most other things, but also installs a clean copy of the OS. It's generally going to produce a "cleaner" system than a straight Upgrade, while not requiring you to completely wipe the hard drive like Erase and Install.
I've done upgrade installs before, but I once ran into a weird bug that ONLY occurred in upgrade installs (I and few other people on the Apple forums saw it); since then I've been somewhat wary of those.
Note on Adobe apps, though: Adobe's installs are notoriously fragile, and while both an Upgrade install and Archive and Install should preserve them, frankly I'd just reinstall the Adobe apps from scratch--it's time consuming but better than having them flake out on you later.
Also note that if you're using CS3, while it works fine under Leopard, the Acrobat Pro 8.0 updater is completely broken; I ended up needing to download the 8.1 patch, install it manually, THEN run Acrobat Pro and tell it to check for updates, at which point the updater would update itself AGAIN (why it doesn't unless you do it through Acrobat is a mystery) and properly recognize and update Acrobat Pro. I just had to figure this procedure out and do it on three machines at work.
I hate Adobe's installers and licensing system so much.