Cheap air/fuel gauges simply tap off the stock oxygen sensor. That sensor can only tell you lean or rich and the car should idle roughly at 14.7:1 and go rich under acceleration. Cruise down the highway at steady 50 mph and see what the gauge does. Should be calmer.
At idle the needle can bounce around quite a bit. Means nothing. It should however go sometimes rich and sometimes lean. That's how the computer adjusts, if it stays lean too long, the computer tweaks the injectors richer. If it stays rich too long, the computer tweaks it leaner. If the computer cannot adjust the ratio, it will set the check engine light and in that case it should be a flashing check engine (meaning stop the car and tow it to a shop - flash means the catalytic converter can burn out).
If you want to know the actual air-fuel ration you need to buy a wide/band oxygen sensor and related gauge. They are much more expensive and will typically run a few hundred dollars. If the car is stock except for K&N, don't bother with the air/fuel gauge.
As for computer hookup. Go read up about "LT1Edit". Don't buy the software (too expensive for a stock car) but you'll understand what software is out there to monitor your engine (and what hardware you need to buy in order for your laptop to talk to your car).
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