If you're using log shipping you need to be aware of some small print. The general idea is to upgrade the secondary server first and then the primary server because you can continue to log ship from 2005 to 2008R2. But this won't work if you're keeping your secondary databases in STANDBY mode rather than IN RECOVERY. If you're using native log shipping you'll have some work to do. If you've rolled your own log shipping (ahem) you can convert a STANDBY database to IN RECOVERY like this:

and then change your restore code to use WITH NORECOVERY instead of WITH STANDBY. (Finally all that aggravation pays off!)

You can either upgrade the secondary server in place or rebuild it. A secondary database doesn't actually get upgraded until you recover it so the log sequence chain is not broken and you can continue shipping from the primary. Just remember that it can take quite some time to upgrade a database so you need to factor that into the expectations you give people about how long it will take to fail over.

For more details, check this out: http://msdn.microsoft.com/en-us/library/cc645954(SQL.105).aspx