Desktop color depth is more of a color configuration in software for what programs are able to use. Windows 8+ only supports 32-bit desktop color depth (which is actually 24 bits color depth plus 8 bits of alpha). Some reasons include Metro/UWP requirements and HDR. Output color depth describes how many bits each color channel is configured to (may be less confusing if it were named something like color channel depth). If red, green, and blue are configured to 8,10, or 12 bits, each color channel can show 256, 1024, or 4096 different lumimance levels of themselves. Desktop color depth is the framework for the sum of all color channel depths for a program to use and output color depth builds on that to specify the amount of color channel information a program is able to pass on through that framework to graphics card output.
desktop depth can only be 32bit (8:8:8:8), but output can be 32bit (10:10:10:2), 40bit (10:10:10:10) for example, desktop animations perform worse when nvcp is configured to 10bit because DWM doesnt have a native 8bit component at this output depth.
Sorry for the necro, but I just want to thank for this explanation. I finally know why nVidia drivers defaults to 8-bit and why forcing 10-bit introduces glitches in desktop.
