USD Digital (represented in the Wallet as USD-D) is an ERC-20 token known as a stablecoin and is fully supported in the Blockchain.com Wallet.
A USD Digital token is not itself a US dollar, but Paxos Trust Company, LLC is responsible for backing each token with a US dollar held in segregated accounts at FDIC-insured, U.S. banks. Paxos Trust Company, LLC is also responsible for issuing and redeeming each token in exchange for $1.00 USD.
In general, a stablecoin is a cryptocurrency asset designed to minimize the price volatility typically associated with cryptocurrencies. To that end, a stablecoin will typically be pegged to another asset or group of assets, such as another currency or commodity.
Holding USD Digital in your Wallet means that you can easily transition between volatile cryptocurrencies and a token pegged to USD. While the fiat estimation of your other cryptocurrency balances will change with the market, the value of your USD Digital balance will always remain the same, and change only with transactions that add to or subtract from your USD Digital balance.
Since USD Digital is an ERC20 token (read more about these here), any transactions with it will cost an additional, small fee in ETH. You can learn more about USD Digital transaction fees and the ETH minimum balance here.