To determine how the area of a square changes when its side length is increased by 25%, follow these steps:

1. Let the original side length be \( s \).
- The original area of the square is:
\[
\text{Original Area} = s^2
\]

2. Increase the side length by 25%.
- The new side length becomes \( 1.25s \).

3. Calculate the new area with the increased side length:
\[
\text{New Area} = (1.25s)^2 = 1.5625s^2
\]

4. Find the increase in area:
- The increase in area is:
\[
\text{Increase in Area} = 1.5625s^2 - s^2 = 0.5625s^2
\]

5. Calculate the percentage increase in area:
\[
\text{Percentage Increase} = \frac{0.5625s^2}{s^2} \times 100\% = 56.25\%
\]


The area of the square is increased by 56.25% when the side length is increased by 25%.

The correct answer is D. 56.25%.