**Core Concept**
Fatty liver, also known as hepatic steatosis, is a condition characterized by the accumulation of excess fat in liver cells (hepatocytes). This occurs due to an imbalance between the synthesis and breakdown of fatty acids in the liver.

**Why the Correct Answer is Right**
The accumulation of fatty acids in the liver is primarily due to the accumulation of triglycerides, which are formed by the esterification of glycerol and three fatty acid molecules. This process is influenced by several factors, including insulin resistance, increased fatty acid synthesis, and decreased fatty acid oxidation. In the context of fatty liver, the liver's inability to export triglycerides to adipose tissue leads to their accumulation within the liver cells.

**Why Each Wrong Option is Incorrect**
* **Option A:** This option is incorrect because, while glycerol is a key component of triglycerides, it is not the primary substance accumulating in fatty liver.
* **Option B:** This option is incorrect because, while cholesterol is a type of lipid, it is not the primary substance accumulating in fatty liver.
* **Option C:** This option is incorrect because, while phospholipids are an important component of cell membranes, they are not the primary substance accumulating in fatty liver.

**Clinical Pearl / High-Yield Fact**
Fatty liver can be reversible with lifestyle modifications, such as weight loss and a healthy diet, but it can also progress to more severe forms of liver disease, such as steatohepatitis and cirrhosis.

**Correct Answer: C. Triglycerides**