Originally Posted by Documentation
BackBufferFormat
The back buffer format. For more information about formats, see D3DFORMAT. This value must be one of the render-target formats as validated by IDirect3D9::CheckDeviceType. You can use IDirect3DDevice9::GetDisplayMode to obtain the current format.
In fact, D3DFMT_UNKNOWN can be specified for the BackBufferFormat while in windowed mode. This tells the runtime to use the current display-mode format and eliminates the need to call IDirect3DDevice9::GetDisplayMode.
For windowed applications, the back buffer format no longer needs to match the display-mode format because color conversion can now be done by the hardware (if the hardware supports color conversion). The set of possible back buffer formats is constrained, but the runtime will allow any valid back buffer format to be presented to any desktop format. (There is the additional requirement that the device be operable in the desktop mode; devices typically do not operate in 8 bits per pixel modes.)
Full-screen applications cannot do color conversion.