**Core Concept**
Tempering of steel is a heat treatment process that involves heating the steel to a specific temperature, holding it at that temperature for a period of time, and then cooling it to achieve desired mechanical properties. This process involves the formation of martensite, a hard and brittle microstructure, which is then tempered to reduce its hardness and increase its toughness.

**Why the Correct Answer is Right**
The tempering process involves the formation of carbides, which precipitate out of the martensite structure, reducing its hardness and increasing its toughness. This is due to the diffusion of carbon atoms out of the martensite grains, resulting in the formation of a more stable microstructure. The tempering temperature and time are critical factors in determining the final properties of the steel.

**Why Each Wrong Option is Incorrect**
**Option A:** Incorrect, as tempering does not involve the formation of austenite, but rather the modification of the existing martensite structure.
**Option B:** Incorrect, as tempering is not a process of reducing the carbon content of steel, but rather of modifying its microstructure.
**Option C:** Incorrect, as tempering is not a process of increasing the hardness of steel, but rather of reducing its hardness and increasing its toughness.

**Clinical Pearl / High-Yield Fact**
It is essential to note that the tempering temperature and time can significantly affect the final properties of the steel, and incorrect tempering can lead to a loss of toughness and an increase in brittleness.

**Correct Answer:** D.