What is the term for making something appear less severe?

The term that refers to making something appear less severe is "palliate." This word is often used in contexts such as medicine, where it describes relieving symptoms without curing the underlying condition, thus reducing the severity of discomfort or distress. In a broader sense, to palliate can mean to mitigate or ease the impact of a negative situation, making it seem less grave than it might truly be.

Within the context of the other options, "neutralize" typically means to counteract or render something ineffective, which does not imply a reduction in severity but rather a complete negation. "Exaggerate," on the other hand, means to make something seem greater or more extreme than it actually is, which is the opposite of what is intended in the question. "Extenuate" can mean to make an offense seem less serious or more forgivable, but it does not encompass the broader idea of reducing severity in various contexts like "palliate" does. Thus, "palliate" is the most appropriate term for what is described in the question.