Light-Speed Shoes
This is an upgrade you'll need to proceed throughout Sonic's story line, so it's hard to miss. After you're done with Windy Valley, go to the City Hall area of Station Square. Jump down the sewers hatch, and pick up the upgrade. With it, by charging the Spin Dash attack, you'll be able to dash through lines of rings.

Crystal Ring
Crystal ring is missable, and you must have Light-Speed Shoes to get it. Go to the Hotel located in Station Square, and go upstairs. You'll notice two buttons, one opens the door in front of you for a couple of seconds, the other makes a trail of rings appear. Charge your Light-Speed Dash, press both buttons, and grab the upgrade. It makes your Light-Speed Dash charge faster.

Ancient Light
After Speed Highway stage, go to the Master Emerald area, in Mystic Ruins. It's on a rock, near the edge of the Island. This one makes your Light-Speed Dash attack up to 7 enemies almost instantaneously.

Jet Anklet
In Station Square, behind the entrance to the Twinkle Park, there's another sewer. Fly up the hole in the ceiling, and get the item. With this, you'll be able to fly faster.

Rhytm Badge
When send to the past during the story line, fly up left of the temple, and you should notice it. Badge allows you to continuously preform the attack, by holding down the attack key.

Showel Claws
It's in the cave near Tails' workshop in Mystic Ruins. Allows you to dig through the ground in your search for the pieces of the Master Emerald.

Fighting Gloves
This one's missable, and pretty usless, too. Go to the jungle area in Mystic Ruins. Glide to your right, and you'll see a ledge on the wall. The upgrade is there. These yellow gloves allow you to do some sort of chargable homing attack. The only time you might want to use it, is during the Chaos 6 boss fight.

Warrior Feather
Given to you after the Whack-a-Mole kind of mini game on the Egg Carrier. You can now spin your hammer, by holding the attack key and pressing directional buttons as fast as you can. Pretty usless.

Long Hammer
After the Egg-Carrier crash-lands into the ocean, replay the same mini-game getting 3000 or more score points. You will unlock the better version of Amy's hammer.

Life Belt
Upon entering the Ice Cap zone you should notice this item near the door. It makes you float, when you're in water.

Power Rod
In Mystic Ruins, go to the right part of the jungle. The upgrade is under the bed in Big's house. You can throw your lure further now.

Lure Power Ups
There are several of these. Each one lets you catch bigger and bigger fish.
1st one is in the same sewer, where you found Tails' shoes
2nd is in the jungle. To get it, go to the left path of Big's house. Take the second path on the left, and you should find it. Marked by the red dot on the map.


3rd one is in the Ice Cap zone. Search for the second breacable ice area, and swim down.

4th is on the Egg Carrier, in one of the prison cells.

Jet Booster
Located on the Egg Carrier, in one of the rooms. Go to your left when exiting Chao garden. Allows you to hover by pressing the jump button in mid air.

Laser Blaster
Go to the room on your right, instead. Only obtainable after the Egg Carrier crash. Your Blaster should now have a splash damage.

Once again, this guide is for the people new to the series. Most of the items it's hard to miss.

Some other game tips:
There are no upgrades for Super Sonic.
You can unlock playable Metal Sonic, by collecting all of the Emblems. Also, no upgrades.
There are Emblems and Chao Eggs in adventure mode.