I currently have Snow Leopard on my internal hard drive, and Lion in one partition on an external drive. Works fine, just requires a reboot to switch between the two.
If your currently running Snow Leopard on your Internal HD, you can use either Carbon Copy Cloner - Home, SuperDuper! or Disk Utility to format and clone Snow Leopard into the External HD, then upgrade your Internal HD to Lion.
If you are already running Lion on your Internal HD, then you will need to set the External HD's partition map scheme and format to make it bootable, then install Snow Leopard from your system or retail 10.6 disc.
Note: In order for the External HD to be bootable it will need to have the Partition Map Scheme set to GUID Partition Table and the Format set to Mac OS Extended (Journaled). Properly partitioning and formatting the External HD can be done using either of the following, CarbonCopyCloner, SuperDuper or Disk Utility.
Also see > OSX Tips Using Disk Utility