Question: I have what may be a simple question (and perhaps silly)... If you release an iOS app, let's say its running version 4.x, but then you push out an update to the AppStore, that compiles using a newer SDK, and specify in requirements you need that SDK version, what happens to the users who don't update their os? 

Am I to assume they don't get the notification to update via app store as their handset OS is not compatible? 
Cheers

Answer: 
The existing users already have an older version of the app which works, and they won't even see an update for the app.
When you create the application, you state in the properties for the application what the minimum iOS revision is that is supported for that application. You can compile an app using a newer version of the SDK targetting the older OS.

You should guard against performing calls that are only available on the newer release using the recommended mechanism from the documentation (Look up the SDK compatibility guide in the docs).

Marking an application for a newer release of the OS without adding features that are needed by the newer OS is adding unnecessary restrictions to the app that would otherwise allow it to run on older releases (not everyone has the latest iPhone, iPad or iPod Touch)

I've developed applications on Windows 7 that run on Windows 2000. It is doable, you just spend a lot of time working around missing features.