The experiment described refers to the classic work of Frederick Griffith, which demonstrated the phenomenon of transformation. The key observation was that when nonvirulent R-strain bacteria were mixed with heat-killed S-strain bacteria, the R-strain bacteria were transformed into a virulent form.
The correct answer to the question about what this demonstrated is:
C) A transforming principle in the S bacteria allowed the nonvirulent R strain to become virulent.
This transformation indicated that some component from the S-strain bacteria (later identified as DNA) was taken up by the R-strain bacteria, rendering them virulent. The experiment laid the groundwork for the later discovery of DNA as the genetic material.