The yellow ring inside the bacterial cell represents the bacterial DNA. Why does this structure disappear by step 3 (this is when replication of viral nucleic acid and protein and envelope.) of the lytic cycle?

During the lytic cycle, viral genome will be transcribed and replicated. Bacterial chromosome will be digested by enzymes coded for in viral DNA to release deoxyribonucleotides that acts as monomers to synthesise more viral DNA for replication of virus to occur.

Basically the virus just enters the bacteria, hijacks the whole macromolecular synthesis factory and breaksdown components in the bacteria to get raw materials to synthesise more copies of itself.