Originally, PocketPC devices all had the same screen size: 320x240.  However, Windows CE devices could have any size screen.  Over the last few versions, however, Microsoft has been allowing some new screen sizes, including 240x240.  With the release of Windows Mobile 6, Microsoft has added 320x320 as a valid screen size.

ITScriptNet currently only allows 320x240 as a valid screen size when you select PocketPC/Windows Mobile as the Terminal Type, although the client will run on a device with any screen resolution.  You can specify any screen size when you select Windows CE as the Terminal Type.  In a future version we will add the ability to select from any of the valid screen sizes for Windows Mobile, and have the client automatically move the Main Menu elements to fit the screen.

This article on the Windows Mobile Team Blog has more detail and a list of the valid screen sizes for Windows Mobile.