Step 1: Concept
For an $n \times n$ matrix $A$ to be diagonalizable, there must exist an invertible matrix $P$ such that $P^{-1}AP = D$.
Step 2: Meaning
The columns of matrix $P$ are the eigenvectors of $A$. For $P$ to be invertible, its columns must be linearly independent.
Step 3: Analysis
While having distinct eigenvalues (D) is a *sufficient* condition, it is not *necessary* (e.g., the Identity matrix is diagonalizable but has repeated eigenvalues). However, having $n$ linearly independent eigenvectors is a requirement.
Step 4: Conclusion
Thus, the independence of eigenvectors is the fundamental necessary condition.
Final Answer: (B)