I should point out now that I have no experience with upgrading in this manner, and that the following is what I would do if I were going to do it myself for the first time.
You can do this by adding the ISO to APT's list of repositories, documentation for which can be found here.
First you need to mount the ISO so APT can find it. Open a terminal and move into the directory in which the ISO is currently sitting. Let's say it's currently in your Downloads folder, you would type
Once you're there, you need to create a directory into which to mount it. Type
to create a directory called 'upgrade' in the current directory. Now you can mount the ISO into your upgrade directory by typing
mount -o loop -t iso9660 ubuntu-11.04-desktop-i386.iso ~/Downloads/upgrade
You may need to precede the above command with
sudo - I'm not sure how permissions will work if you try mounting it in a user-owned directory. Now you just need to add this upgrade directory, and with it your upgrade ISO, to APT's sources list.
sudo apt-cdrom add
sudo apt-cdrom ident
sudo apt-cdrom -d "upgrade" -r
From here, it's just a simple case of running
sudo apt-get update
sudo apt-get upgrade
and APT will pull the new packages out of the mounted ISO. Once the upgrade is complete, you can delete the
upgrade directory as it is no longer needed.