The correct answer is (a) The chromosomal copy of the target gene replaces the target gene flanked by loxP sites
To elaborate: For cre-lox excision, the chromosomal copy of the target gene is replaced by target gene flanked by loxP sites. The second step is supply of cre recombinase. Integration of cre is done by a controllable promoter which is followed by the induction of promoter. This induction results in expression of cre and recombination along loxP sites, leading to excision.