Which evolutionary development paved the way for the tremendous diversity of life forms observed on earth today?

The correct answer is cellular differentiation.

The cellular differentiation during the evolution resulted in the formation of the cells with different and specific functions. As, the cells were designated to perform a particular function, the complexity of the organism increased. Also, the different types of cells and tissues present in the organism is dependent on its habitat and its behavior. As, different organism lives in different environment, their body types become different and accordingly the cells present in them are specialized. The specialization of the tissues are encoded by the genes present, hence, all the progeny inherits the same characters and level of cellular organization. Hence, due to the cellular differentiation, a tremendous variety of the organism are present.

substitution is the answer in this case