These audio files will help you when you practice "moving up the neck".
Start with the first exercise, which is a basic scale. After you have played the third note (F#) as you normally would, move your index finger up to the fifth fret - it is marked with a dot on the side of the neck. Play the fourth note (G) with your index finger, the fifth note (A) with your middle finger, and the sixth note (B) with your ring finger.
The seventh note (C) is the hard one. You are used to playing that note with your middle finger, but here you have to stretch your pinky up to the eleventh fret to reach it. (Cheaters notes: - the 11th fret sits directly between two dots, so you don't have to waste time looking for the fret.)
The last note can also be a little tricky - you have to reach back to get the fifth fret (marked with a dot) with your pinky. If your hands are too small to make that stretch between the fifth and eleventh frets, you might have to let your whole hand slide back a bit.
Once you are comfortable with the scale, try the arpeggio. Your hand moves to third position at the same time as it did when you played the scale.
Like chords, there is usually more than one option here - so there is more than one point in a scale or arpeggio where you could move in to third position. I am specifically asking you to move to third position on the fourth note of the scale, because it's more logical to move at that place during the arpeggio. If you notice, the third note on the arpeggio is an open string. Since none of your fingers are on a fret for that note, you can pluck the open string while your hand is moving along the neck. This allows you to keep the tempo of the arpeggio perfectly.