Concept: Lithium aluminum hydride (LiAlH$_4$) is a strong reducing agent that reduces ketones to secondary alcohols. The number of stereoisomers depends on the number of chiral centers formed and the symmetry of the molecule.
Step 1: {Identify the reduction product.}
The starting material is benzil (C$_6$H$_5$COCOC$_6$H$_5$). Reducing both carbonyl groups yields hydrobenzoin: C$_6$H$_5$CH(OH)CH(OH)C$_6$H$_5$.
Step 2: {Identify chiral centers.}
The product, 1,2-diphenyl-1,2-ethanediol, has two identical chiral carbons. Each carbon is attached to -H, -OH, -C$_6$H$_5$, and the other chiral center.
Step 3: {Count the stereoisomers.}
For a molecule with two identical chiral centers, there are three possible stereoisomers: a pair of enantiomers (d- and l-forms) and one optically inactive meso form due to internal symmetry.