I translated 'how are you' on Google translate and it gave me the response 'wie geht es dir'. On the other hand, when I translated 'How are you' (making the H capital), the translation became 'Wie geht es Ihnen'. Any reason why?
That is a technical issue. (The inner magic of google)
both translate to
For a bit of technical background: Google translate takes its language knowledge from something we can only dream of: Reading millions of closely translated texts in two ore more languages comparatively and then using Bayes-filters and similar things to build its database. It doesn't know a language, but it knows that in 57.3% of cases, when the German text says "Wie geht es Ihnen?" the English text says "How are you?". So with some statistic deviation google might 'think' that the capitalization changes the meaning, which is correct in many cases, but not this one.
Context is important for any translation but an automatic translation will fail if it can not guess the context. This can nicely be shown with the following attempts of Google Translate: