You haven't quite gotten the meaning of the exponential notation correct, which is why you're confused

A function of an operator is defined by its series expansion,
f(\hat{D}) = f_0 + f_1 \hat{D} + f_2 \hat{D}^2 + \cdots
Typically the function
f is one that can be expanded in a Maclaurin series (Taylor series around 0), so in that case the coefficients f_n are just the same coefficients that appear in the Maclaurin series:
f_n = \frac{1}{n!}f^{(n)}(0)
For the exponential function, the series is
e^x = 1 + x + \frac{x^2}{2} + \cdots
so the operator e^{\hat{D}} is defined as
e^{\hat{D}} = 1 + \hat{D} + \frac{\hat{D}^2}{2} + \cdots
In your case, \hat{D} is multiplication by a constant composed with the derivative operator \mathrm{d}/\mathrm{d}x, so the notation \hat{D}^n is effectively telling you to take the
n'th derivative and then multiply by b^n. This would of course be applied to whatever the operator is acting on - for example, in
e^{b\mathrm{d}/\mathrm{d}x}\psi(x)
each term would be produced by differentiating ψ(x) some number of times and then multiplying by
b that many times.