The D2 plugin enables users to create modern diagrams within Obsidian using the D2 diagram scripting language. By turning text into diagrams, the plugin offers a seamless way to visualize ideas and structures directly in your notes. It supports various layout engines, customizable themes, padding, sketch-like rendering, and other configuration options to enhance the visual appeal of diagrams. Users can create diagrams by using fenced code blocks with the d2 language tag. This plugin requires a local installation of D2 and allows for additional customization by specifying paths and settings.