The pascal's triangle is formed by starting at 1 on the center, then expanding to the left and right as a pyramid by adding the two numbers on the diagonals directly above of the one you're calculating. A small Pascal's triangle can be seen below:
Since the term we have is squared, then we need to use the third row of the Pascal's triangle, which is "1 2 1", the third term is 1. The correct answer is D.