Yes. A normal install of Snow Leopard will replace the system files with whatever version is on the DVD. All of your personal data and third party apps will remain.
In Leopard and earlier, you choose Archive and Install. This moves all of the OS components on the hard drive to a folder named Previous System, and all new files from the DVD or CDs replace them. Once you are sure everything is running as expected, you can trash the Previous System folder. All it's doing is taking up a lot of space.
As with any such install though, make sure to have a full backup first in case something goes wrong during the installation.