The .D2V file is a dummy project file containing instructions on how to process other video files, usually referencing several .VOB files.
These .D2V files are generated by a tool called DVD2AVI which uses the TMPGEnc video encoder. When a .D2V file is opened, the encoder actually reads the linked .VOB files, passed- through it, and processes them based on the notes that are contained in the .D2V file.
Using a tool called VFAPI Reader Codec, the .D2V file can be transformed into a special version of the .AVI format in which case it can be opened virtually in different processing tools, like VirtualDub, Premiere, etc.
It is only required that the source files, linked to the .D2V file, are left on the hard drive as the actual data comes from them.