The correct answer is B) mutual induction. A transformer works on the principle of mutual induction, where a changing magnetic field in the primary winding induces a voltage in the secondary winding. This induced voltage is proportional to the turns ratio between the primary and secondary windings, allowing transformers to step up or step down voltages as needed. The other options are incorrect: A) Self-impedance refers to the impedance of a single winding, not the fundamental principle of a transformer's operation. C) Attraction and repulsion are related to the operation of motors and generators, not transformers. D) Increasing power is not a principle of operation, but rather a function that transformers can perform by adjusting the voltage and current.