The /D flag is essential. Without it, Windows will try to create a file symbolic link instead of a directory link.
New-Item -ItemType SymbolicLink -Path "C:\Link" -Target "D:\Target" symbolic link folder windows
Junctions are frequently used by the OS to maintain backward compatibility. For example, older applications looking for C:\Documents and Settings are redirected to C:\Users via a Junction. The /D flag is essential