HBD is basically a smart contract where the blockchain pays the equivalent of one US dollar in hive if the HBD holders decide to redeem them by doing a conversion operation.
In others words it's a "promise" that you will be able to have the purshasing power of one USD. If the price of hive drops significantly then the amount in circulation can increase dramatically (via conversions since each HBD is worth more hive) which can lead to a situation where the price of hive goes even lower creating a vicious cycle.
The 10% limit is set so that this event doesn't happen. If the debt ratio exceeds 10% then the blockchain protects itself by progressively paying less then one USD's worth in hive via conversions.
When the debt ratio gets to 9% the blockchain will produce less and less HBDs to slow down this process.