Whatever you do, make sure you make a fresh backup of your wallet regularly and definitely before upgrading.
Go to the source repository and read the readme file.
http://sourceforge.net/projects/bitcoin/files/Bitcoin/bitcoin-0.8.1/If you do this an upgrade should not hurt you even if the upgrade brakes something, witch it normally wold not do.
If i misunderstood the question and you are wondering what physically happens to your coins, the answer is "absolutely nothing".
Your coins are not stored in your wallet but in the shared blockchain, your wallet is actually your private secret key that lets your wallet program access and manage the bitcoins witch are associated with your private key.