Step 1: Understanding fossils.
Fossils are the preserved remains, imprints, or traces of organisms from the past. Fossils help in understanding the habit, environment, and behaviors of extinct animals.
Step 2: Analyzing the options.
(A) Fossils of primitive forms of organisms occupy upper layers of the earth during fossilization: Incorrect — Fossils are generally found at various levels depending on the age of the organism.
(B) Fossils help in understanding the habit of extinct animals: Correct — Fossils allow scientists to study the behavior and living conditions of extinct species.
(C) Actual remains of fossils are generally formed on land: Incorrect — Fossils can form both on land and in aquatic environments.
(D) Moulds are the most common type of fossils: Incorrect — While moulds are common, the most common type of fossils are impressions, not just moulds.
Step 3: Conclusion.
The correct answer is (B).