Data will not be affected but you should always make a backup just in case.
Start by upgrading to Snow Leopard: http://store.apple.com/us/product/MC573Z/A/mac-os-x-106-snow-leopard
You might be able to upgrade to Lion if you wanted to. Doubt a Mac old enough to run 10.4 is new enough to run the latest (10.8 Mountain Lion).
Lion specs: http://support.apple.com/kb/sp629
Mountain Lion specs: http://support.apple.com/kb/sp654