A 404 error page is something you should avoid having on your website if you are an entrepreneur looking to increase website traffic. They could be a step back in SEO efforts and are more likely than not to prevent your site from getting indexed.
In plain speak a 404 DNS error or a File Not Found error is what the server spits out when someone types in a URL that does not exist on your website or is under construction and is hence unavailable. A page or two that give out such errors on your website can be tolerable for most users. Search engines on the other hand, don’t like them.
Known to affect the visibility of a particular website in SERP’s, a File Not Found error can be turned to your website’s advantage with customized pages that cloak the error though.
A stand-by page called a 404.htm page is an excellent way to get past the 404 error and can benefit your search engine optimization efforts enormously. Take a look at the File Not Found error pages put up on Smashing Magazine.
These stand-by pages not only provide the user to your website something to chuckle/think/learn about, but also encourage the search engine to include the page as relevant to the website and hence index-worthy.
Absolutely do not tell your web designers to create a 404 error page that is an exact copy of your homepage- its not going to win your website any popularity points. Encourage user-friendliness and accessibility- after all that’s the main aim of any website.