Its fairly simple. Spells go App1,2,3,4 then Adept 1,3 and Master1.
You can upgrade as high as your scribing skill, which tends to be anything if you have the funds. App2's can be purchased at vendors. App3 and Adept3s can be made by players, and Adept 1 and Masters are dropped from opponets.
Once you have a suitable scroll for a spell you can cast, just right click it and select Scribe and your spell will be upgraded.
Note as a general rule you can not scribe spells you dont have. For exampel you can't scribe Breeze. :) You use these to upgrade your current spells. The only exception that i know off being your "fun" spell that you can get around 20.