Concept:
A p-n junction consists of:
\[
\text{p-region}
\]
and
\[
\text{n-region}.
\]
At the junction, diffusion of charge carriers creates a depletion region containing immobile ions.
This depletion region behaves as an insulating layer and possesses very high resistance compared to the p-region and n-region.
Step 1: Understand reverse biasing.
In reverse bias,
\[
p\text{-side}
\]
is connected to the negative terminal and
\[
n\text{-side}
\]
is connected to the positive terminal.
The external voltage increases the width of the depletion layer.
Step 2: Analyze the resistance of different regions.
The p-region and n-region contain majority charge carriers and therefore possess relatively low resistance.
The depletion region contains almost no free charge carriers and therefore has very high resistance.
Step 3: Apply the voltage division principle.
In any circuit, the larger voltage drop occurs across the region having the larger resistance.
Since the depletion region offers maximum resistance,
\[
\text{most of the applied reverse voltage}
\]
appears across the depletion region.
Step 4: Write the final conclusion.
Hence, in a reverse-biased p-n junction diode, the applied voltage mostly drops across the
\[
\boxed{\text{depletion region}}.
\]
Therefore,
\[
\boxed{\text{(C)}}
\]
is the correct answer.