From your answer, I understand you don't use shared storage!? In this case upgrading requires some downtime. The first step is to ensure your hosts are supported (see http://www.vmware.com/go/hcl) by ESXi 5.1. If this is the case, you could either install a new vCenter Server (in case you don't use features like vDS and don't need the logs) or upgrade the existing vCenter Server to 5.1. Once this is done upgrade the hosts one-by-one (with the VMs on that host cleanly shut down, not suspended) either by using Update Manager or interactively via CD.
Regarding incensing (you unfortunately didn't answer the question about SnS), I'd suggest you login to your My VMware portal to see whether your existing licenses show up as upgradable. Whichever option you choose, I'd recommend you have an up-to-date backup of the VMs.
André