Upgrading your Django reusable app to support Django 1.7 requires setting up two separate virtual environments, one for each version of Django, updating the migrations files to support both versions, running the migrations in both versions, and configuring Virtual Environments. This process involves renaming the old migrations directory, using Django 1.7 to build new migrations, adding the reusable app to the list of installed apps in the test project, and testing everything out with the terminal commands. The guide also covers documentation, uploading to PyPI, and final steps to update your Django reusable app successfully.