Almost everyone we know needs a little more space (and sometime a lot more space). That’s where room additions come in. And if you don’t have room to add out, it’s time to consider adding up. This article from Better Homes & Gardens serves as a good introduction to the concept of second-level home additions:

Ripping the roof off your house and adding a whole new level on top may sound like a drastic means of gaining space, but there are various situations in which it makes sense. In some cases, a new level can be a big money-saver; in others, the real payback is something you can't put a price on: the ability to stay in the neighborhood you've lived in for years or to continue enjoying a setting that couldn't be duplicated elsewhere.
Three Basic Options
There are at least three ways to expand vertically during your home renovation. One is to literally tear off the roof and build a whole new upper level from scratch. Another is to sever the existing roof around the edges and lift it off temporarily, then put it back in place after the new level has been framed in. A third tactic for your house addition is to expand an upper level out across an existing one-story section, such as a flat-roof garage or porch.