The formation of the alveolar bone occurs through the process of intramembranous ossification. This type of ossification involves the direct differentiation of mesenchymal tissue into bone without a prior cartilage model.

- Intramembranous ossification is responsible for forming flat bones, including most of the bones of the craniofacial skeleton such as the alveolar bone, which supports the teeth.
- In contrast, endochondral ossification involves a cartilage template that is gradually replaced by bone, typically seen in long bones like the femur and tibia.
- Perichondral ossification refers to bone formation at the surface of cartilage, often involved in appositional growth.
- Heterotopic ossification is abnormal bone formation in soft tissues, not a normal physiological process for alveolar bone development.

Therefore, the correct answer is Option 2: Intramembranous ossification, as the alveolar bone develops directly from mesenchymal cells without a cartilage precursor.

Reference: Gray's Anatomy, 42nd Edition, Volume 1, Chapter 6 – Development of the Skeleton and Bone Tissue