Why masksToBounds = YES prevents CALayer shadow?

Because shadow is an effect done outside the View, and that masksToBounds set to YES will tell the UIView not to draw anything that is outside itself.

If you want a roundedCorner view with shadow I suggest you do it with 2 views:

UIView *view1 = [[UIView alloc] init];
UIView *view2 = [[UIView alloc] init];

view1.layer.cornerRadius = 5.0;
view1.layer.masksToBounds = YES;
view2.layer.cornerRadius = 5.0;
view2.layer.shadowColor = [[UIColor blackColor] CGColor];
view2.layer.shadowOpacity = 1.0;
view2.layer.shadowRadius = 10.0;
view2.layer.shadowOffset = CGSizeMake(0.0f, 0.0f);
[view2 addSubview:view1];
[view1 release];

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