Braking works purely by friction. When the brake pads or shoes are pressed against the disc or drum, the friction force between the rubbing surfaces resists the wheel's rotation and slows the vehicle down. This friction does not store the vehicle's motion anywhere, it simply dissipates it, and by the principle of conservation of energy, the kinetic energy the vehicle loses cannot disappear, it has to reappear as heat generated at the rubbing surfaces, which is why brake discs get noticeably hot after hard braking. So the kinetic energy of the vehicle is converted to heat energy, option (4).