Final answer:
Antidiuretic hormone (ADH) increases water reabsorption in the kidneys by promoting the insertion of aquaporin water channels, thereby reducing urine volume and helping maintain fluid balance.
Step-by-step explanation:
The antidiuretic hormone (ADH), also known as vasopressin, plays a crucial role in regulating the balance of fluids in the body. Its primary action is to increase water reabsorption in the kidneys. When ADH is released, it binds to receptors on cells in the collecting ducts of the kidneys, leading to the insertion of aquaporin water channels into these cells' membranes. This mechanism allows water to be reabsorbed from the urine back into the bloodstream, thus decreasing urine volume and preventing dehydration. Therefore, the correct answer to the question is 'C) Increases water reabsorption.'