How to upgrade an iPad without losing data?
First, make sure that iTunes is signed into the iPad owner's Apple account. It is best if this is done in a separate login account on the computer so you do not loose any of your saved apps and backed up data.

Then from there once you plug it in to a full backup to the computer, no upgrading yet! Always do a full backup before an upgrade. Once backed up go and do the upgrade. This will wipe all data on the iPad! Once the update is installed, it will then restore all the prior apps, data, music, movies, pictures and books the tablet.

After that, everything should be golden.

(This is based on my experience upgrading an iPhone 4 from iOS 4 to 5.)