Learn German: Wie geht es dir heute?

In English, we ask "How are you?". But in German, the standard greeting literally translates to "How goes it to you?". This is why you use the verb gehen (to go) and the pronoun es (it).

Why is the word dir used here instead of du?

Because the phrase literally means "How goes it to you?", you need the form of the pronoun that means "to you". That form is dir (known as the dative case). du is only used when "you" is the main subject doing the action.

Is this a formal or informal way to ask someone how they are?

This is informal because it uses dir. You would use this with friends, family, and children. If you were asking a stranger, a colleague, or a boss, you would replace dir with the formal word Ihnen to say Wie geht es Ihnen heute?.

How do I reply to this question?

Since the question asks "How goes it to you?", you reply by saying "It goes to me...". A very common answer is Mir geht es gut (I am fine, literally "To me goes it good"), or you can just say Gut, danke! (Good, thanks!).

Do I always have to say the whole phrase in casual conversation?