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802.11g access points (APs) operate in the 2.4 GHz ISM band, using 20 MHz wide channels. 802.11n APs can operate in either the ISM or UNII band -- that's the set of channels above 5 GHz -- with the option of using 40 MHz wide channels.
802.11n APs that use the ISM band will indeed compete for air space with existing 802.11g APs. That's especially troublesome for 802.11n APs that use 40 MHz channels, since the ISM band is only wide enough to fit 3 non-overlapping 20 MHz channels (1, 6, and 11). For example, suppose an 802.11n AP uses Channels 6 and 7 to create a 40 MHz channel -- that will generate co-channel interference for every other 802.11g AP in the vicinity except those using Channel 1.
This is precisely why many WLAN planners recommend deploying 802.11n in the 5 GHz UNII band. That band might not be completely vacant -- in particular, you or your neighbors might be using it for 802.11a traffic. However, the UNII band is more lightly occupied and has more non-overlapping channels to start with. So the possibility of finding an unoccupied 20 or 40 MHz channel in that range is simply much higher. If you deploy your 802.11n AP at 5 GHz, 802.11n clients will not compete with or interfere with your 802.11g clients at all.
However, if you deploy old and new clients in the same frequency band, you'll need to enable coexistence mechanisms. Specifically, there are two modes of coexistence specified by 802.11n: legacy mode and mixed mode. In legacy mode, 802.11n clients behave just like 802.11g clients -- this amounts to using new hardware in the same old way as before, with little performance improvement. In mixed mode, 802.11n clients will send both the old-fashioned 802.11g preamble and the new 802.11n preamble before they start transmitting data.
Mixed mode lets 802.11n clients take advantage of performance improvements like space-time block coding, short guard intervals, and frame aggregation, while giving 802.11g clients a "heads up" to avoid collisions. The extra preamble does add overhead, preventing 802.11n clients from achieving optimum throughput. But this is the price you must pay to ensure peaceful coexistence between old and new clients sharing the same band.
 View our network administration expert's response to this question: Will mixing 802.11g and n APs in the same network cause conflicts?
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