This is something that annoys me about MSSQL (rant on my blog). I wish MSSQL supported upsert. 
@Dillie-O's code is a good way in older SQL versions (+1 vote), but it still is basically two IO operations (the exists and then the update or insert)
There's a slightly better way on this post, basically:
--try an update
update tablename 
set field1 = 'new value',
    field2 = 'different value',
    ...
where idfield = 7
--insert if failed
if @@rowcount = 0 and @@error = 0
    insert into tablename 
           ( idfield, field1, field2, ... )
    values ( 7, 'value one', 'another value', ... )
This reduces it to one IO operations if it's an update, or two if an insert. 
MS Sql2008 introduces merge from the SQL:2003 standard:
merge tablename as target
using (values ('new value', 'different value'))
    as source (field1, field2)
    on target.idfield = 7
when matched then
    update
    set field1 = source.field1,
        field2 = source.field2,
        ...
when not matched then
    insert ( idfield, field1, field2, ... )
    values ( 7,  source.field1, source.field2, ... )
Now it's really just one IO operation, but awful code :-(