A friend of mine has a 97 Tahoe whose gas gauge is inaccurate. It still registers having a quarter of a tank when it is actually empty.

What is wrong? How can it be fixed?

On an accurate guage the tank would actually only have a couple of gallons left when showing 1/4 tank. All GM guages work that way and you have to keep more than 1/4 tank at all times. When you go below 1/4 tank you are REALLY low and risk burning up your pump. Best way to see this is to watch how many miles you get to the first 1/4 tank of gas, then the second, then the third. You will see that the gauge is not accurate in the first place as you will use little gas thru the first 1/2 tank (going by guage) but use a lot the last 1/2. The best way to always read a GM guage is to assume you are out of gas when it shows 1/4 tank, as you have very little left even on a properly working guage. In your friends case, his is off a little so 1/4 means ZERO. My old Corsica is the same way. Would have to drop the tank and replace the float / sender assy and in my case it is better just to keep more gas in it.