The latest Xcode for Snow Leopard is 4.2 and that appears to be the highest it will go. 10.6.8 is required for iOS support.
The latest Xcode for Lion as of 4.29.2012 is 4.3.2, which requires 10.7.3 and is needed to work with iOS devices at iOS v5.1
Building for ARC requires Lion. You can build an app that uses ARC that will run on Snow Leopard, but it must be built on Lion.
iCloud requires Lion.
Storyboards are iOS 5 and up only.
Retina support for the new iPad requires the app be build using the latest 5.1 SDK.