Is it possible to run both Xcode 3 and 4 side-by-side on the same machine?
To answer your question: Yes. When you install Xcode 4 (and its dev tools) your "old" Xcode folder gets renamed as Developer-old (provided you already had Xcode 3 installed)

To answer Ricket: Xcode 4 doesn't support a few things (yet) like Plugins and some features (like assembly code) are non existent in Xcode4 (perhaps yet or never) so if you rely on some things you might want to keep a copy of Xcode 3 around.

If you want to take a look at a good Xcode 4 review (and see some of the key benefits/drawbacks) have a look at this.