Step 1: Recall the restriction-modification system.
Bacteria possess restriction enzymes that cleave foreign DNA and methyltransferases that methylate their own DNA.
Step 2: Identify the protective enzyme.
DNA methyltransferase modifies specific recognition sites on host DNA, preventing restriction endonucleases from cutting it.
Thus,
\[
\boxed{\text{DNA methyltransferase}}
\]
protects host DNA.
Therefore,
\[
\boxed{(C)}
\]
is the correct answer.