I certainly would not label Bd3 as "bad" Just because an engine finds a move +.44 vs. +1.11 doesn't make it a bad move. My thinking is the engine doesn't like it because of ...c5, attacking a center pawn with a flank pawn, and threatening ...c4 forcing the bishop back, losing a tempo.
Help! Why is Bd3 so bad in this position?
It is mainly because Black's answer is c5 and the position of the bishop on d3 is not secured. But you have to be careful about those nice looking moves. The bishop does actually nothing on d3. Another example is 1. d4 d5 2. c4 e6 3. Nc3 Be7 4. cxd5 exd5 5. Bf4 c6 6. e3 Bf5 7. g4 Be6 and here most people seem to think moving the h pawn is better than playing the seemingly obvious 8. Bd3.

Thank you for the replies. Both of your replies make sense. The engine's planned move in response to Bd3 was indeed ....c5 so clearly you both know what you're talking about.
Can you suggest how White should proceed here? Where do the king-side minor White pieces belong, and which side do you think White should castle?
I reached this position (against Shredder at a fairly low level) and played Bd3 here. Stockfish prefers Nge2 (+1.11), Qd2 (+.99), e4 (+.95) and many other moves. It ranks Bd3 at +0.44.
Can anyone enlighten me as to why Bd3 is so bad here? Does the Bishop fundamentally not belong here or something?