Worldwidewords.org writes that the expression was originally used to describe someone sharp and not easily fooled. Snuff was expensive, and was therefore used by affluent men who would be able to distinguish the quality.  An early form of the phrase, “up to snuff and a pinch above it,” confirms it related to the use of tobacco.  The meaning shifted over time to mean someone who is efficient and capable or something that meets standards of required quality.