I'm putting the wiring loom from a 95 4runner(kzn130) into my 93 hilux(ln106). The connection from the new wiring loom for the tank fuel gauge(sender) has 3 wires but the fuel gauge(sender) on the tank on my truck only has 2 terminals.
I've a few questions:
what's the difference between the two type of gauges? What exactly is the little sensor type thing on the gauge with the wire coming from it?

What are my options for wiring this up? Can I just use two of the wires from the loom and connect them to my existing gauge? or will that not work/not give an accurate reading? or do I need to use the 3 wire gauge from the 4runner?

 

The third wire in the 4Runner harness is for the low fuel light in the combination meter. The 3 wires in the new loom should be yellow/blue (low fuel light), yellow/red (fuel gauge 12v.) and brown (ground).
Other than the waterproof connector that connects the 12v. gauge wire from the outside of the tank to the inside part of the tank...I'm not sure what you are talking about. This connector also insulates the 12v. source from ground.
The low fuel light was an option on SR5 trucks and 4Runners. I'm not sure if it was available for the DLX models or not. You don't need to change gauges, if you could get the 3 wire gauge connector from the 95 4Runner gauge you could just put your 2 wires in it and it would plug together with the 3 wire loom connector on the new harness. On the other hand your combination meter probably has a spot for a low fuel light, and if you are upgrading to the 95 harness you could change the gauge and have a low fuel light on your 93, However if your truck is a reg cab longbox it may have a 19 gallon tank, 4Runner tanks were smaller 17 gallon I think and the float arm of the fuel gauge is a bit shorter. It's not a big deal it only affects the gauge reading when you are close to empty, but if you have a working low fuel light then you won't runn out of fuel! You can swap the float arm between the two gauges without not much trouble.

 

That bit I'm talking about is this:

I'm just trying to understand what the function of that bit is.

 

That's your low fuel switch!