Will the data from my persistent Live-USB automatically transfer when I install?

I have a Live USB of Lubuntu 12.04. I have been working with it for quite some time now and have installed quite a few packages in it.

Now, I want to convert this to an actual install. When I do so, will my settings and all the packages I have installed get transferred or will I only get the default Factory version?

No, they will not; it appears you are using a Live-USB with the persistent storage option, which creates a separate file to hold all your user data and installed packages, etc. You will have to copy data manually after the install and reinstall any additional packages.