The new version can be installed over the old version, this means you must install the new version to the same installation directory where the old version has been installed.
By default the different versions (i.e. PT 2007, 2006, 2005) install themselves to a version specific directory, for example, c:\program files\jv16 PowerTools 2007\
In order to install the program over the previous version you must manually specify to the installation program that you wish to install the new version over the old one.
But don't worry, there's no problem if you have installed PT 2006 and PT 2007 to the same computer to different directories, they work as before and don't affect each other in any ways.