Do I have to move contributed modules to "sites/all/modules" for upgrading? In Drupal 6, I have placed my contributed modules inside the modules directory in the Drupal root directory (not in sites/all/modules). I need to upgrade my site to Drupal 7.

Do I have to move the contributed modules inside sites/all/modules before upgrading to Drupal 7?
You don't have to, but it is highly recommended. It greatly ease identification of the files to keep while upgrading (and following the upgrade documentation).