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];