Option 1 is incorrect because not every process of embryo formation occurs in a test tube. Option 2 is incorrect because while the embryo may be present in a test tube during certain stages, it is not where the entire development takes place.

The correct answer is option 3. `Test Tube Baby` refers to in vitro fertilization (IVF) where the fertilization process occurs outside the body in a laboratory dish or test tube. This is an external fertilization process. Once the eggs are fertilized with sperm in the laboratory, they are carefully monitored for development. The resulting embryos are then transferred into the woman`s uterus for further development. The development of the embryo after fertilization is internal, occurring inside the woman`s body.

Therefore, option 3 accurately explains the phenomenon of `Test Tube Baby`.