Does the upgrade apply to the entire account?
Yes, the premium membership applies to the entire account. Upgraded accounts will always have full access to their albums and photos — with absolutely no uploading restrictions.
If I have a premium membership and I set up an album and invite others to contribute to it, do these contributors also need a premium membership?
No, your friends and other contributors will have full access to the albums that you invite them to and can upload an unlimited number of photos.