In the PMBOKĀ® Guide, communication is categorized by its level of formality and the medium used. Demonstrating a " critical feature " to a high-level stakeholder like a Project Sponsor is a significant project event.
Why Choice B is correct:
Formal Communication: Presentations, demonstrations, and milestone reviews are considered formal. Because the team is showcasing a " critical feature " to the sponsor, this is an official project event used to gain approval or feedback, not a casual water-cooler chat.
Verbal Communication: A live demonstration involves speaking, explaining, and responding to questions in real-time. Even if software is being shown on a screen, the primary method of conveying the value and status to the sponsor is through a verbal presentation or " interactive " dialogue.
Scenario Application: In Agile (Sprint Reviews) or Waterfall (Phase Gate Reviews), these demonstrations are scheduled, structured meetings designed to satisfy governance requirements.
Analysis of other options:
A (Informal written): This would include instant messages, texts, or quick notes. A demonstration of a critical feature is too significant for this category.
C (Formal written): This includes project reports, contracts, or briefing documents. While a report might accompany a demo, the act of " demonstrating " is primarily a verbal and visual interaction.
D (Informal verbal): This refers to unscheduled conversations, ad-hoc meetings, or phone calls. Demonstrating a milestone or critical feature to a sponsor is an official act of transparency and usually requires preparation, moving it into the " formal " category.

Key Concept: The Project Management Institute (PMI) emphasizes that the project manager must match the communication type to the audience and the importance of the information. For a Project Sponsor reviewing a critical feature, Formal Verbal (Choice B) is the standard approach to ensure the sponsor understands the progress and provides the necessary buy-in for the project to continue.