He is just trading the knight for the bishop; it's an even trade. Also, it removes the white bishop from the long diagonal, which is often a pretty strong piece. I know I would rather keep the white bishop in the Queen's Gambit.
There's nothing particularly wrong with the trade. At least at my level of understanding :D
@Martin_Stahl: I don't mean to sound critical, but the Bishop was not removed from the long diagonal (i.e., h1-a8), but I think I know what you meant, because the b1-h7 diagonal is almost as long. Still, for consistency's sake, I thought that making that clarification might be beneficial.
@OP: Martin is right that the trade does not appear to be faulty. Some people view Bishops as slightly more powerful/valuable than Knights, and so they like to make that trade. In the example you gave, I think the trade might be a bit premature. To understand why, you should read the forums, several articles, and some videos on Chess.com explaining the advantages and disadvantages of each piece type against each other.
I also would have thought seriously about taking out that Bishop with an exchange. Black was probably concerned about future vulnerability to a Queen-Bishop double cannon targeting h7, and since he had already advanced his h-pawn, defending against that with g6 is less attractive, even if he didn't have to keep his pawn on g7 to cover his Knight. When he made the trade he still had a Knight on f6 , but Bxf6 ...gxf6 opens up his King, and he'll be glad to have White's light Bishop off the board so it can't work with his Queen.
okay... heres a short little game I played against myself. the game is exactly like your game up until 10.b3 (which we replace with Bxf6). I want you to look at how useful the white-squared bishop becomes. In this test game, black is constantly on the defensive because the bishop is on a good diagonal...just look how the Q+B force black to make so many weakening moves!
The moves I made may not be best (for either side) but I think they are all reasonable moves human being might try. And for that reason, I hope this game will have instructive value. Moreover, I hope my annotations are clear.
@Martin_Stahl: I don't mean to sound critical, but the Bishop was not removed from the long diagonal (i.e., h1-a8), but I think I know what you meant, because the b1-h7 diagonal is almost as long. Still, for consistency's sake, I thought that making that clarification might be beneficial.
Oops. I'll just blame it on a long week 
I play this guy often, and while most of the times he does win, there is some trades he does that i don't understand why he does them. For example in this board he took out a bishop with a knight to only loose his knight.