The correct answer is C. "The waves beside them danced; but they Out-did the sparkling waves in glee" includes personification.
Personification is a literary device that consists in assigning human attributes to a thing, an abstract entity or an animal, or, in other words, to non-human objects. Therefore, personification is a common literary tool and also a form of figurative language.
In this specific case, waves have been given the human quality of dancing. They have been identified with a characteristic of human beings; therefore, the waves have been personified.