Yes, it will. But there may be some license issues (You can only install a copy of MAC OS in a virtual environment if you do own a license). You may also encounter some difficulties installing MAC OS on VMWare. But once you get past them, Xcode and the iPhone simulator should work fine.
You can look at this article for instructions on how to install Mountain Lion in VMWare:
Easily Run Mac OS X 10.8 Mountain Lion Retail on PC with VMware Image – Simple Steps