Let's dissect it. There are three parts:
cd -- This is change directory command./d -- This switch makes cd change both drive and directory at once. Without it you would have to do cd %~d0 & cd %~p0. (%~d0 Changs active drive, cd %~p0 change the directory).%~dp0 -- This can be dissected further into three parts:
%0 -- This represents zeroth parameter of your batch script. It expands into the name of the batch file itself.%~0 -- The ~ there strips double quotes (") around the expanded argument.%dp0 -- The d and p there are modifiers of the expansion. The d forces addition of a drive letter and the p adds full path.