A standard installation of 10.6.3 over 10.5.x will replace only system components; it will not touch personal data, preferences or applications (other than the core Mac ones such as iTunes, QT, Mail and Safari).
The main change is that it strips out all code support for the PPC chips (G series), and will run only on Intel.
When installing, be sure to select Rosetta from the optional installs; it's a code translator for running applications originally written for PPC syatems (AppleWorks, MS office up to 2004, many Adobe apps and numerous device drivers).
Yes there will be software incompatibilities and some drivers for older printers and particularly scanners will need updating.
http://support.apple.com/kb/HT3258
http://support.apple.com/kb/HT3669
http://snowleopard.wikidot.com/
I can't emphasise enough the importance of having a backup before beginning any upgrade. Preferably a bootable clone of the current system.
99% of installations go smoothly, but there's always the chance of a previously unnoticed fault or a file system irregularity on the HD causing problems. So do please backup first.
(You should in any case always have a backup in case of hardware failure).