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Why: Can a capo be put diagonally on a guitar? If not, why?

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Hi there! I got an acoustic Honer guitar for Christmas '09. It's almost march, and I'm acctually get REALLY good. I got my capo from eBay, new, and have gotten pretty used to playing with it on. I have a few questions though:

I've been told that you have to put it on one of the frets (the lines on the neck of the guitar, I believe?) I was wondering, does it matter which one you put it on? I am aware each one makes the strings sound different. I.e., the lower down the neck you go, the higher the pitch sounds. But my main question is, can you put it on in a diagonal-like way? I was playing around on my guitar and tried it, and it sounds good. I really don't know. Please explain. No rude comments about my question, me, whatever. I'm new to this, and am not yet in lessons, and don't know anyone who plays guitar, so I have to ask on here. Thanks in advance.