Learn German: Wie geht es dir? — Es geht. - How are you?

In German, you don't literally ask "How are you?". Instead, the phrase Wie geht es dir? literally means "How goes it to you?". The word dir is the "to you" form (dative case) of the informal "you" (du).

Does the use of dir mean this is an informal question?

Yes. Because it uses dir, this is how you ask a friend, family member, or child. If you were speaking formally to a stranger or an authority figure, you would use the formal "to you" and ask Wie geht es Ihnen?.

What does the reply Es geht literally mean?

It literally translates to "It goes." Germans use this common phrase to mean "I'm OK," "So-so," or "Not bad." It is a perfectly neutral response for when things are just average.

Could I just answer with Gut if I am having a good day?

Absolutely! If you are doing well, you can just say Gut (Good) or use the full phrase Mir geht es gut (It is going well to me). You only use Es geht when your mood is somewhere in the middle.