The correct answer is B. Walking through the woods. Just like its name says, a participial phrase is a phrase (combination of a few words) where the headword is a present or past participle. Present participle can most easily be recognized by its ending (-ing), whereas past participle has -ed as the most common ending. You may wonder why the C option isn't a participial phrase. After all, it has a past participle (-ed). But you have to keep in mind that this is actually the simple past tense (made of past participle), which functions as a predicate. Therefore, the C option isn't a phrase, but a clause.
