I am a little curious what happens in the following situation. You have an existing app on the iTunes store (with customers) that uses iOS4, you then release an update to the app that uses a newer iOS.
Your "deployment target" is what matters. Setting the deployment target allows your app to set it's minimum required OS version. Many developers like to set that as far back as possible, unless your app depends on a features only available in a new iOS version.
Lets say you have an app compiled with the iOS 4 SDK and set 3.0 as the deployment target.
Now you release an update compiled with the iOS 5 SDK and set 4.0 as your deployment target.
Apple will only keep exactly one version of your app on the app store.
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