That's half true.
The 404 page is generated by the browser, when there is no 404 set by the server.
The are two simple ways to create a customized 404 error page redirect :
1. Through apache httpd.conf configuration file. Add the line :
ErrorDocument 404 http://www.yourname.com/errorpage.html
yourname.com can be an external page out of your domain.
2. Through .htaccess file. Create a .htaccess file in the main dir of your website with the following line :
ErrorDocument 404 /ERROR.html