Pair-production means:

The correct answer is Option (2) → annihilation of a gamma ray in to an electron and positron

Pair production is the process in which a high-energy gamma-ray photon, passing close to a nucleus, disappears and an electron and a positron appear in its place. Charge is conserved because the photon is neutral and the pair has charges \( +e \) and \( -e \). Energy is conserved only if the photon energy is at least the rest energy of the two particles, \( 2\times0.511\,\mathrm{MeV} = 1.02\,\mathrm{MeV} \).