12v sensor needs a ground?

A resistor does not "smooth" a fluctating voltage. A resistor-Capacitor circuit will do so.

IF (I am making assumptions here) the voltage meter is showing a steady voltage, and the Arduino is showing erratic values I can think of two possible causes: You ar not using the right pins (and the program is reporting an opencircuit/nonsense value) or your physical construction of the circuit is not solid enough, there is a loose connection.

We might get this kind of problem if the sensor is not outputting a single steady voltage level, but some pulsetrain or there is some other "noise" on the line. The voltage meter takes long samples, ie. it sort of shows an average voltage level. The Arduino ADC is a lot faster and might truly sample the voltage. Only way to know is to use an oscilloscope. (Or use an RC circuit...but then we move into a whole new set of problems)

Could you get your friend to write a little/short description of how/what his sensor is doing, which you then include here?

(NB: Have you tried the Scandianvian Forum where you can write in Finnish?)