There are several ways, but it depends on the car.
Most cars use a float in the tank, which attaches to a resistor track by an arm. In some cars there’s also a “damper pot” filled with fuel from the tank which slows down movement of the float when the car moves.
Then, the fuel guage needle,which whether it’s a physical needle or not, is electronically controlled. That electronic control has another damping in the signal before the fuel needle moves.
Cars can also cross reference the float reading from the tank with the amount of fuel injected since last refuel to better estimate remaining fuel level.
I’m not sure why someone else has said fuel tanks have baffles. They don’t. It at least none that I ever saw in several years designing fuel tanks
EDIT: so apparently damper pots are called baffles in North America. Every day is a learning day!
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