Interfacing instrumentation amplifier
What I understand is if I set D3, D2, D1 = 0 and D0 = 1 from GPIO of microcontroller, I would set gain 1.

That's correct.



Also I would like to know what will happen if I set gain as 0. I read that gain increases the amplitude of the signal. So does gain 0 means it won't amplify the signal?

According the datasheet:


  If the gain control code is 0000, the IC operates in software shutdown mode, i.e., the main op amp is turned off so that the PGA dissipates less power.


and


  Send a gain code of 0000 to one IC to set its output to a high impedance state