In Xcode 3.2.5 I use "Build And Archive" to create an IPA file. In Xcode 4 you can use "Product -> Archive" to archive an application in an .xcarchive bundle.
How can I create an .ipa file with Xcode 4?
Creating an IPA is done along the same way as creating an .xcarchive: Product -> Archive. After the Archive operation completes, go to the Organizer, select your archive, select Share and in the "Select the content and options for sharing:" pane set Contents to "iOS App Store Package (.ipa) and Identity to iPhone Distribution (which should match your ad hoc/app store provisioning profile for the project).
Chances are the "iOS App Store Package (.ipa)" option may be disabled. This happens when your build produces more than a single target: say, an app and a library. All of them end up in the build products folder and Xcode gets naïvely confused about how to package them both into an .ipa file, so it merely disables the option.
A way to solve this is as follows: go through build settings for each of the targets, except the application target, and set Skip Install flag to YES. Then do the Product -> Archive tango once again and go to the Organizer to select your new archive. Now, when clicking on the Share button, the .ipa option should be enabled.
I hope this helps.