According to Apple, the Snow Leopard install DVD will do what’s called an “archive and install” on your iMac, which means that, even on an upgrade from 10.4, the 10.6 installer will keep a copy of all your files and settings that are in your home directory during the upgrade and they will be there in 10.6. The 10.6 installer won’t tell you that it is doing the archive and install, but it is. (And there is no requirement to upgrade to 10.5 first when going from 10.4 to 10.6.)
You need a full version of Snow Leopard, such as these at Amazon.com Mac OS X version 10.6.3 Snow Leopard: Software or Best Buy Mac OS X v10.6.3 Snow Leopard – Mac or at Apple Mac OS X 10.6 Snow Leopard – Apple Store.
The archive and install means you won’t loose your files and settings during an upgrade. But it’s still a good idea to make your own backup of files beforehand, just in case there are problems during the upgrade. (It’s a real good idea to have a backup all the time.) It’s best to clone the whole drive to an external drive using Carbon Copy Cloner, as I describe here: Mac Q & A: Backing up your Mac. You can always manually move files to a USB drive for a backup if you don’t have that many.
Right after you install Snow Leopard, run Software Update to get all the latest updates that have been issued since your Snow Leopard DVD was manufactured.
Moving to 10.6 means that some programs you have that run under 10.4 might not run under 10.6. Microsoft Office 2004 will run, but in a slower compatibility mode than newer versions of Office, such as 2008 or 2011. Some applications in Apple’s iWork and iLife may require their own upgrades.
If you want completely start over with Snow Leopard and erase 10.4 from your iMac, you can, but it’s a different process. See another Q & A of mine: Mac Q & A: Update an Old MacBook. That will walk you through formatting the hard drive and doing a clean install of Snow Leopard. That will erase everything on your hard drive, so be sure and make a backup as described above if you want to keep anything. This way is not an archive and install; it is a complete erasure, so everything from 10.4 will be gone.