It will alter some files, and some programs.
But going from 10.4 to 10.5 is relatively safe (as opposed to if you had an intel based Mac and went from 10.4 to 10.6 - NEVER do an OS upgrade install when skipping one major OS in between, as the upgrades are NOT tested for that type of install).
Mostly those alterations should be in the OS itself and in some applications, not your user files.
So your personal files and documents, music, etc should stay fine, safe, and sound.
But I would strongly recommend before doing ANY type of OS upgrade (new, upgrade install, archive and install, whatever you choose) to make sure there is a full backup of the system.
Also to be extra safe, make some copies of the important files (AddressBook data backup for instance) in another location too than the primary.
Just in case - if things would go corrupt for whatever unexpected reason, you will still have everything in store (even if it's a really tiny change that things would go wrong, it's not worth risking).
Some applications may need to be updated after the OS upgrade to newer versions.
E.g. OnyX is one of those that needs to be very specificly for the OS update.
Also applications that add things such as kernel extensions to the system will need to be reinstalled after OS upgrade - such as VMware Fusion, Parallels, Q etc.
Personally I would backup everything and go with a clean install and bring files over selectively from the previous OS (also to do some cleaning of the files I no longer need).
But as an alternative, the upgrade install is good too. Just don't skip the backup part first - just in case.
