Under which circumstances will the Sharing button appear on a custom object called Defect?

The correct choice is based on the visibility rules that govern how records are shared in Salesforce. The Sharing button becomes available on a custom object when the organization-wide default (OWD) sharing setting for that object is set to Private or Public Read Only.

When the sharing model is set to Private, only the record owner and users higher in the role hierarchy can see and edit the record by default. Users will have to use the Sharing button to explicitly share the record with others. In contrast, a Public Read Only setting allows all users to view the record, but they cannot edit it unless explicitly granted access via the Sharing button.

In contrast, if the sharing model is set to Public Read/Write or Public Read/Write/Transfer, the records are accessible to all users for both viewing and editing without the need for the Sharing button. Therefore, the Sharing button would not be necessary, as users already have the required permissions to interact with the records.

In summary, the Sharing button is part of the functionality that allows you to manage record-level access in situations where the default sharing settings are restrictive, thus appearing when the settings are either Private or Public Read Only.