Final answer:
Gerald localized the sound in the forest by using differences in arrival time between his ears, with this processing occurring in the medial superior olive. The option (A) is correct.
Step-by-step explanation:
Gerald localized the source of the sound using differences in arrival time between the two ears, which relies on neurons in the medial superior olive. This process is an example of utilizing an interaural time difference, where the time of sound arrival is slightly earlier in the ear closest to the source.
In contrast, the lateral superior olive processes interaural intensity differences, which is the variation in loudness perceived by the two ears based on head-related sound wave attenuation. Therefore, the correct answer is A) differences in arrival time between the two ears; medial superior olive.