The correct answer is option 'C', 8 states.

Explanation:
To understand why the maximum states possible for the counter formed by three T flip-flops is 8, we need to understand the operation of a T flip-flop and how it can be used to build a counter.

1. T Flip-Flop:
A T flip-flop is a type of flip-flop that toggles its output based on the input signal. It has a single input (T) and a single output (Q). The output changes state (toggles) when the input is high (1) and remains the same when the input is low (0).

2. Counter Operation:
A counter is a digital circuit that counts the number of events or occurrences of a specific signal. In this case, we are using three T flip-flops to build a counter.

- Initially, all the flip-flops are reset to 0.
- When a clock pulse is applied, the first flip-flop (FF1) toggles its output.
- The output of FF1 is connected to the input of the second flip-flop (FF2).
- When the next clock pulse is applied, FF2 toggles its output based on the input from FF1.
- The output of FF2 is connected to the input of the third flip-flop (FF3).
- When the next clock pulse is applied, FF3 toggles its output based on the input from FF2.

3. Maximum States:
To determine the maximum states possible for the counter, we need to consider the number of unique combinations of outputs from the three flip-flops.

- Each flip-flop has two possible output states: 0 or 1.
- For three flip-flops, the total number of possible combinations is 2^3 = 8.

Therefore, the maximum states possible for the counter formed by three T flip-flops will be 8 (option 'C'). These states can be represented by the binary numbers from 000 to 111.