By default, the music you have in iTunes is stored in the "Music" folder in your user folder. That's a different place from your Applications folder, so if you tossed the iTunes application, it wouldn't junk your music.
However, you should confirm where your iTunes program is storing your music by going to the Advanced setting in iTunes Preferences. A window there should show you your iTunes music location. Just make sure you don't throw away that folder to ensure you're not deleting your music.
But more to the point, if you just want to upgrade iTunes, you shouldn't have to delete the program. Just use Software Update to download and install the latest version of iTunes. It should replace your old iTunes with the new program without deleting your music files.
(It's always a good idea to do a backup before upgrading, though, just to be sure.)