I found this information on AndroidForums and it is very helpful, so just wanted to keep it (maybe it helps someone else also):
It’s immediately loaded when the phone is switched on. It’s mostly responsible for checking and initialising the hardware and starting the phone’s software, for flashing official software releases (RUUs via Fastboot), as well as a few other things. In some ways it’s comparable to the BIOS on a PC.
How do I root HBOOT?
You can’t, it makes no sense. It’s a bootloader, not Android. It’s like trying to play a DVD on your kettle.
What does upgrading HBOOT do?
It may add extra hardware support for new phones (e.g. SLCD displays) and may fix a few bugs. HTC doesn’t release information about it.
What does downgrading HBOOT do?
The opposite. So, if you flash an SLCD phone with an old version of HBOOT that doesn’t have the support, the screen won’t work.
But rooting depends on HBOOT version?
Why does upgrading HBOOT remove root?
It doesn’t. When you flash an official update your ROM is replaced with an official one, which is why root is lost.
How do I change HBOOT version?
By installing an official RUU/update. There’s no other way – the bootloader is protected by the phone’s hardware security because a corrupt bootloader means a bricked phone with no way to recover. RUUs contain a version of the bootloader, which is automatically flashed.
Why do I need to downgrade HBOOT to root 0.92?
You don’t. You had to downgrade Android because unrevoked3 couldn’t root froyo. The new release can, so it works.
Why all the talk about HBOOT then?
Because it is confused with software release, which is the important part. An RUU won’t work if the installed software is a higher version (e.g. 1.20.x won’t work if you have 1.21.x), and people have mistaken that check for HBOOT version.
What about the xda 0.92 to 0.80 downgrade? It runs on froyo.
It’s an engineering/test release from HTC that was leaked. It fakes its software version to 2.09.405.8 so it will run on froyo and downgrade the ROM, so long as you’re not on a higher release than that. The process has nothing to do with HBOOT, but it does downgrade the bootloader to 0.80 as a side effect – and results in a dead screen on SLCD phones. It’s generally a bad idea to use this hack.
Why would any of this matter?
Because instructions based only on HBOOT version are not reliable. They may not work, or may cause your phone to stop working.
A very small operating system on the phone, totally separate from Android, that is used to update your phone’s existing software via OTA updates, and has extra security privileges. When you permanently root your phone you also replace this with a different version (‘custom recovery’) that will allow you to install custom ROMs and not just official HTC updates.
Usually refers to the boot image and the system image (the kernel and Android), but broadly refers to all of the phone’s software. A custom ROM is anything that is modified from stock HTC. Custom ROMs you download can only be installed in recovery.
Rom Upgrade Utility. HTC’s official way of flashing the phone’s software (i.e. completely replacing it, not updating existing software). An RUU can get past the phone’s security, and can change parts that you normally can’t even when rooted, e.g. the splash screens, the bootloader. An RUU wipes everything off the phone and is like a ‘total’ factory reset. That’s why it can be used to debrand or rebrand a phone.