A key feature of the changes introduced in Subversion 1.7 is the centralization of working copy metadata storage into a single location. Instead of a .svn directory in every directory in the working copy, Subversion 1.7 working copies have just one .svn directory—in the root of the working copy. This directory includes (among other things) an SQLite-backed database which contains all of the metadata Subversion needs for that working copy.

Once you've upgraded your working copies, older SVN clients won't be able to access those working copies. So make sure that you update all your SVN clients (in case you use not just TortoiseSVN).