The UnknownFormatConversionException is an unchecked Java exception that arises at runtime when an unknown conversion specifier is used during data formatting, such as employing an invalid specifier like %i. This exception does not need to be declared in a method's throws clause and is thrown when a format specifier contains an unknown parameter value, exemplified by using %w instead of a valid specifier like %s for strings. To address this issue, developers should ensure that format specifiers have known values, thereby preventing the exception. The text also highlights the importance of managing errors efficiently and introduces Rollbar, a tool for tracking and analyzing errors in real-time, which aims to simplify the process of fixing Java errors by automating error monitoring and triaging.