SBV is the plain caption file YouTube Studio exports and accepts, and few other programs read it. SRT is understood by nearly every player and editor, so converting is how a YouTube caption track gets reused elsewhere.
The text is read as UTF-8 or UTF-16, whichever the file is. An older file in another code page is read using the charset it declares, or as Windows-1252 if it declares none, so accented letters in an unlabelled legacy file can come out wrong. A file that is not text, such as the picture-based subtitles of a DVD, is refused instead of being converted to nonsense. Of the styling, only italic, bold, underline and the position on screen (top, middle or bottom, left, centre or right) travel between formats; fonts, colours, outlines and effects do not. Positioned lines are written with {\an} codes, which many players honour; players that do not simply show them at the bottom.