Symptoms
Trying to upgrade to 4.6.8 and get "unsupported database format" error during K2 database test
Diagnoses
K2 Database compatibility mode not set to "SQL 2008 (100)"
Please see documentation on changing compatibility modes here:
http://msdn.microsoft.com/en-us/library/bb933794(v=sql.105).aspx
Resolution
Set compatibility mode to "SQL 2008 (100)" and issue was resolved.