Rancidity of lipids of lipid-rich foodstuff is because of

The correct option is Oxidation of fatty acids.

Let us understand the concept of rancidity step-by-step:
Rancidity refers to the condition produced by the aerial oxidation of unsaturated fats and oils present in food materials, which is marked by an unpleasant odor and taste.

When lipid-rich foodstuff (containing fats and oils) is exposed to air, the oxygen present in the atmosphere reacts with the fatty acids of the lipids. This chemical process is known as oxidation.
During oxidation, the double bonds of unsaturated fatty acids are cleaved, leading to the formation of highly volatile and foul-smelling aldehydes, ketones, and short-chain fatty acids.

Let's review why the other options are incorrect:
1. Reduction of fatty acids: Reduction is the opposite of oxidation and does not occur spontaneously under normal storage conditions to cause spoilage.
2. Hydrogenation of unsaturated fatty acids: Hydrogenation is a commercial chemical process used to convert liquid vegetable oils into solid fats (like margarine) by adding hydrogen. It increases stability and prevents rancidity rather than causing it.
3. Dehydrogenation of saturated fatty acids: Dehydrogenation involves the removal of hydrogen, which is not the primary pathway for the auto-oxidation process that leads to rancidity.

Therefore, the degradation and off-flavors associated with the rancidity of lipid-rich foods are directly caused by the oxidation of fatty acids.