What is the complete upgrade path for Mac OS X version 10.7?
For Mac OS X Lion 10.7, you need to have Snow Leopard (10.6) installed and updated to have the Mac App Store. So yes, if you had a computer still on Leopard 10.5, you would first have to install Snow Leopard, update it to get the Mac App Store update, and then install Lion from the App Store.

You mentioned:


  I know 10.8 is coming out soon).


It's coming out tomorrow! :)
Which is great, considering that Mountain Lion 10.8 allows Snow Leopard 10.6 and higher Macs to upgrade directly! 

I've never had any problems upgrading an OS, although I usually run a backup before just in case (and it's a good idea).

I can't find an official Apple article for upgrading from Leopard 10.5, but I'll edit this post if I do.  I would assume that it is as simple as following the directions given when inserting a Snow Leopard install disk.