On Snow Leopard, you would need to boot from an external OS to wipe the drive.
On Mountain Lion (or Lion), the system makes a recovery HD so you can self-wipe the Mac. This is a much, much faster and easier task, so I recommend you upgrade first and then do the wiping using a recovery boot and Disk Utility.
I personally would do these steps (and you could skip the first three steps if you wish since things are going to get erased later whether you clean up first or not):
- Make a new admin account on Snow Leopard - call it Apple or something generic and set it to be the account that logs into the Mac.
- Log out of all accounts and reboot
- Delete your account and let the system do a quick delete of the content
- Install Lion or Mountain Lion
- Install updates to the OS and then shut down the Mac
- Reboot into OS X Recovery - hold down Command-R during startup
- Use Disk Utility to do a seven pass erase or whatever level of wiping you prefer.
- Quit Disk Utility to go back to the main Recovery menu
- Reinstall your OS on the cleanly wiped drive from the main menu
- Power off the Mac once the OS has been installed so that the buyer gets that "Welcome to the Mac" experience but no chance to recover your files or data
If I were doing erasing of a personal Mac, I would do a one pass zero and then enable FileVault on Mountain Lion. That would take the zeroes and then encrypt each block securely - so that no two blocks would be identical on the drive. If there were work data, I might repeat zeroing it and turning on a second File Vault pass or follow whatever policy work approves for disposal of confidential data. In reality, anyone that wants to recover data from a one pass write of zeroes needs to take the drive apart in a clean room and image it with some high priced tools, so scrambling things with FileVault seems like enough overkill to me.
Also, you might look here for answers and comments on selling a Mac with software that is licensed for download like Lion and Mountain Lion - most people ask the seller for an email and gift the purchase to them so that the buyer has a legitimate copy. My steps above won't keep your Apple ID on the Mac and the intaller self-deletes itself, so at worst, the seller could undelete that one file and recover the Apple ID email you used. To counter that, you could boot into recovery after the OS was installed and wipe the free space using Disk Utility.