Friedel-Crafts reaction is a type of electrophilic aromatic substitution reaction in which a hydrogen atom on an aromatic ring is replaced with an alkyl or acyl group. In this specific case, the reaction is between benzene and ethylene in the presence of HCl and anhydrous aluminum chloride (AlCl3) as a catalyst.

The reaction proceeds through the following steps:

1. Formation of the electrophile: The anhydrous aluminum chloride (AlCl3) reacts with the HCl to form a complex, AlCl3·HCl. This complex acts as a Lewis acid and accepts a chloride ion from HCl to form the electrophilic species, a carbocation (C+).

2. Activation of the benzene ring: The carbocation formed in the previous step attacks the benzene ring, displacing a hydrogen atom and forming a sigma complex. This step is facilitated by the presence of the Lewis acid catalyst, which helps in stabilizing the carbocation.

3. Rearrangement (if necessary): In some cases, the carbocation formed may undergo a rearrangement to form a more stable carbocation. However, in the case of the reaction between benzene and ethylene, rearrangement is not required.

4. Deprotonation: The sigma complex formed in step 2 is highly unstable and undergoes deprotonation to regenerate the aromaticity of the benzene ring. The deprotonation is usually carried out by a Lewis base, such as the chloride ion.

The final product of the reaction is ethylbenzene, in which the ethyl group is attached to the benzene ring. The reaction can be represented as follows:

Benzene + Ethylene → Ethylbenzene

Therefore, the correct answer is option 'C', ethylbenzene.

The Friedel-Crafts reaction is an important method for the synthesis of alkylated aromatic compounds. It is widely used in organic synthesis to introduce alkyl groups onto aromatic rings. The reaction conditions, such as the choice of catalyst and reaction temperature, can be varied to achieve different substitution patterns on the aromatic ring.