Generally, D3 is engaged to enable braking when driving down steep hills, so driving on the highway is not ideal. On the other hand, especially in crowded cities, D3 allows optimum speed during stop-and-go traffic. Ideally, it should be used at speeds less than 30 mph.
When should I drive on D3?
Use D3 to provide engine braking when going down a steep hill. D3 can also keep the transmission from cycling between third and fourth gears in stop-and-go driving. For faster acceleration when in D3 or D4, you can get the transmission to automatically downshift by pushing the accelerator pedal to the floor.
Should I drive my car in D or D3?
As the name suggests, the D3 (or sometimes just 3) mode will only utilize the first 3 gear ratios of your car, or in some, locks it on the 3rd gear only. Just like the 2 and L, it will shift at a higher gear if the maximum RPM has been reached. It will also maximize the RPM range per gear for the needed power and pull.