Refer to figure.
A pallet is essentially a large metal tray that fits into the aircraft and can be secured easily by latches in the aircraft's flooring. The benefit of a pallet is that it can be used to carry large or odd shaped pieces of cargo. Indeed, several pallets can be used together to carry larger items such as cars.

Any cargo on the pallet must be secured however, and this is normally done with straps or netting which is placed over the cargo and secured to the pallet.

Looking at the answers:

'Has fallen out of use due to the lack of protection' --> INCORRECT. Although a pallet does not offer the same protection as a Unit Load Device (ULD) it will always have a use for odd shaped or large cargo.

'Consists of multiple cargo boxes on pallets stored in the cargo holds' --> CORRECT. As described above and also shown in the figure.

'Consists of passenger baggage on pallets stored in the cargo holds' --> INCORRECT. Pallets are used for odd shaped or large cargo items. Passenger bags are loaded in ULD's or loose in bulk.

'Can be loaded without specific loading equipment' --> INCORRECT. The pallets and their cargo are heavy and large, and require specialist lifting devices to place in and out of the aircraft. Considering a cargo aircraft, the floor is also designed with special roller beds and ball bearings to allow the pallets to be moved inside the aircraft.