Can't say I know exactly what that command switch is for, but...
I ran it on a virtual machine (e.g. "bash -D"), and yes, you get another Bash environment--in other words a shell within a shell, but without any environment variables. For instance, my subshell had a prompt of "bash-4.1$" which (I believe) is the default prompt if $PS1 is not set.
Also, you can exit the sub-shell by pressing Ctrl-D.
Again, I'm not sure what the -D is supposed to accomplish. I just glanced at the man page, but as I recall, the description did say "no commands will be executed."
I'll play with it a little more and see if I can figure out exactly what it's intended use is.
Well, playing with it some and reading the man page literally:
DH@virtUbuntu:~$ bash -D
So, as the man page says:
A list of all double-quoted strings preceded by $ is printed on the standard output
I imagine you would redirect standard input from a file, the output of a command, or something else to make this more useful.
As an example:
DH@virtUbuntu:~$ echo '$"greetings" "earthling" "we" $"are" "your" $"new" $"overlords"' > test_data.txt
DH@virtUbuntu:~$ bash -D < test_data.txt